[Federal Register Volume 87, Number 62 (Thursday, March 31, 2022)]
[Rules and Regulations]
[Pages 18665-18694]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-06611]



[[Page 18665]]

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SMALL BUSINESS ADMINISTRATION

13 CFR Part 121

RIN 3245-AG91


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

AGENCY: U.S. Small Business Administration.

ACTION: Final rule.

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SUMMARY: The U.S. Small Business Administration (SBA) is increasing its 
receipts-based small business size definitions (commonly referred to as 
``size standards'') for North American Industry Classification System 
(NAICS) sectors related to Professional, Scientific and Technical 
Services; Management of Companies and Enterprises; Administrative and 
Support and Waste Management and Remediation Services. Specifically, 
SBA is increasing the size standards for 46 industries in those 
sectors, including 27 industries in NAICS Sector 54 (Professional, 
Scientific and Technical Services), two industries in Sector 55 
(Management of Companies and Enterprises), and 17 industries in Sector 
56 (Administrative and Support and Waste Management and Remediation 
Services).

DATES: This rule is effective May 2, 2022.

FOR FURTHER INFORMATION CONTACT: Samuel Castilla, Economist, Office of 
Size Standards, (202) 205-6618 or [email protected].

SUPPLEMENTARY INFORMATION:

Discussion of Size Standards

    To determine eligibility for Federal small business assistance, SBA 
establishes small business size definitions (usually referred to as 
``size standards'') for private sector industries in the United States. 
SBA uses two primary measures of business size for size standards 
purposes: Average annual receipts and average number of employees. SBA 
uses financial assets for certain financial industries and refining 
capacity, in addition to employees, for the petroleum refining industry 
to measure business size. In addition, SBA's Small Business Investment 
Company (SBIC), Certified Development Company (504), and 7(a) Loan 
Programs use either the industry-based size standards or tangible net 
worth and net income-based alternative size standards to determine 
eligibility for those programs.
    In September 2010, Congress passed the Small Business Jobs Act of 
2010 (Pub. L. 111-240, 124 Stat. 2504, September 27, 2010) (``Jobs 
Act''), requiring SBA to review all size standards every five years and 
make necessary adjustments to reflect current industry and market 
conditions. In accordance with the Jobs Act, in early 2016, SBA 
completed the first five-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. SBA also adjusts its monetary-based size 
standards for inflation at least once every five years. An interim 
final rule on SBA's latest inflation adjustment to size standards, 
effective August 19, 2019, was published in the Federal Register on 
July 18, 2019 (84 FR 34261). SBA also updates its size standards every 
five years to adopt the Office of Management and Budget's (OMB) 
quinquennial North American Industry Classification System (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).\1\
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    \1\ On December 21, 2021, the U. S. Office of Management and 
Budget (OMB) published its ``Notice of NAICS 2022 Final Decisions . 
. .'' (86 FR 72277), accepting the Economic Classification Policy 
Committee (ECPC) recommendations, as outlined in the July 2, 2021, 
Federal Register notice (86 FR 35350), for the 2022 revisions to the 
North American Industry Classification System (NAICS), . . . .'' In 
the near future, SBA will issue a proposed rule to adopt the OMB 
NAICS 2022 revisions for its table of size standards. SBA 
anticipates updating its size standards with the NAICS 2022 
revisions, effective October 1, 2022.
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    This final rule is one of a series of final rules that will revise 
size standards of industries grouped by various NAICS sectors. Rather 
than revise all size standards at one time, SBA is revising size 
standards by grouping industries within various NAICS sectors that use 
the same size measure (i.e., employees or receipts). In the prior 
review, SBA revised size standards mostly on a sector-by-sector basis. 
As part of the second five-year review of size standards, SBA reviewed 
all receipt-based size standards in NAICS Sector 54 (Professional, 
Scientific and Technical Services), Sector 55 (Management of Companies 
and Enterprises), and Sector 56 (Administrative and Support and Waste 
Management and Remediation Services) to determine whether the existing 
size standards should be retained or revised based on the current 
industry and Federal market data. After its review, SBA published in 
the November 13, 2020, issue of the Federal Register (85 FR 72584) a 
proposed rule to increase the size standards for 27 industries in NAICS 
Sector 54, two industries in Sector 55, and 17 industries in Sector 56. 
In this final rule, SBA is adopting the proposed size standards from 
the November 2020 proposed rule without change.
    In conjunction with the current comprehensive size standards 
review, SBA developed a revised ``Size Standards Methodology'' 
(Methodology) for developing, reviewing, and modifying size standards, 
when necessary. SBA's revised Methodology provides a detailed 
description of its analyses of various industry and program factors and 
data sources, and how the agency uses the results to establish and 
revise size standards. In the proposed rule itself, SBA detailed how it 
applied its revised Methodology to review and modify where necessary, 
the existing size standards for industries covered in this final rule. 
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 (84 FR 14587) of the issuance of the final revised 
Methodology. SBA's ``Size Standards Methodology'' white paper is 
available on its website at www.sba.gov/size.
    In evaluating an industry's size standard, SBA examines its 
characteristics (such as average firm size, startup costs, industry 
competition and distribution of firms by size) and the small business 
level and share of Federal contract dollars in that industry. SBA also 
examines the potential impact a size standard revision might have on 
its financial assistance programs, and whether a business concern under 
a revised size standard would be dominant in its industry. SBA analyzed 
the characteristics of each receipt-based industry in NAICS Sectors 54, 
55, and 56, mostly using a special tabulation obtained from the U.S. 
Bureau of the Census from its 2012 Economic Census (the latest 
available). The 2012 special tabulation 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

[[Page 18666]]

size distributions of firms by various receipts and employment size 
groupings. To evaluate average asset size, SBA combines the sales to 
total assets ratios by industry, obtained from the Risk Management 
Association's (RMA) Annual eStatement Studies (http://www.rmahq.org/estatement-studies/) with the simple average receipts size by industry 
from the 2012 Economic Census tabulation to estimate the average assets 
size for each industry. SBA also evaluated the small business level and 
share of Federal contracts in each of the industries using data from 
the Federal Procurement Data System--Next Generation (FPDS-NG) for 
fiscal years 2016-2018.
    Table 4 of the November 2020 proposed rule (85 FR 72584), Size 
Standards Supported by Each Factor for Each Industry (Receipts), shows 
the results of analyses of industry and Federal contracting factors for 
each industry and subindustry (exception) covered by the proposed rule. 
Of the 91 industries and three subindustries (i.e., exceptions) 
reviewed in the proposed rule, the results from analyses of the latest 
available data on the five primary factors supported increasing size 
standards for 46 industries, decreasing size standards for 40 
industries and two subindustries, and maintaining size standards for 
six remaining industries. Table 1, Summary of Calculated Size 
Standards, summarizes the analytical results from the proposed rule by 
NAICS sector.

                                  Table 1--Summary of Calculated Size Standards
----------------------------------------------------------------------------------------------------------------
                                                  Number of size  Number of size  Number of size  Number of size
       NAICS sector             Sector name          standards       standards       standards       standards
                                                     reviewed        increased       decreased      maintained
----------------------------------------------------------------------------------------------------------------
54.......................  Professional,                      48              27              18               3
                            Scientific and
                            Technical Services.
55.......................  Management of                       2               2               0               0
                            Companies and
                            Enterprises.
56.......................  Administrative and                 44              17              24               3
                            Support and Waste
                            Management and
                            Remediation Services.
                                                 ---------------------------------------------------------------
    All Sectors..........  .....................              94              46              42               6
----------------------------------------------------------------------------------------------------------------

    In the November 2020 proposed rule, SBA discussed the impacts of 
the COVID-19 pandemic on small businesses and society in general. 
Recognizing the wide-ranging economic impact of the pandemic, SBA 
decided not to lower any size standards notwithstanding analysis that 
suggested lowering them. Instead, SBA proposed to maintain all size 
standards for industries in which the analytical results supported a 
decrease or no change to size standards and adopt all size standards 
for which the analytical results supported an increase to size 
standards. To evaluate the impact of the changes to size standards 
adopted in this final rule on Federal contracting and SBA's loan 
programs, SBA analyzed FPDS-NG data for fiscal years 2018-2020 and its 
internal data on its loan programs for fiscal years 2018-2020. The 
results of that analysis can be found in the Regulatory Impact Analysis 
section of this final rule.
    In the proposed rule, SBA sought comments on its proposal to 
increase size standards for 46 industries, and retain the current size 
standards for the remaining 48 industries or subindustries in Sectors 
54, 55, and 56. Specifically, SBA requested comments on whether the 
proposed revisions are appropriate for the industries covered by the 
proposed rule; whether the decision not to lower any size standards is 
justified by the consideration of the impact of the COVID-19 pandemic 
on small businesses and overall economy; whether the equal weighting of 
individual factors to derive an industry size standard is appropriate; 
and whether the data sources used were appropriate or sufficient.

Discussion of Comments

    SBA received a total of 93 comments to the proposed rule from a 
wide range of entities, including individuals, businesses/corporations, 
trade associations, and academic institutions. Of the 93 comments 
received, ten comments were either invalid (blank) or not relevant to 
the proposed rule and three comments were submitted twice. Among the 
remaining 80 unique and pertinent comments, 45 referenced to the size 
standard for NAICS 541330, six to NAICS 541310, 24 to NAICS 541930, six 
to other industries, including NAICS 541810, 541611, 541990, and 
541350, and six did not specify any 6-digit NAICS code. Of the 80 
pertinent comments to the proposed rule, 45 or 56% expressed support 
for the proposed changes; 16 or 20% opposed the proposed changes; 16 or 
20% expressed mixed support or suggested alternatives; and the rest 
took other positions or raised other issues. Comments also included a 
submission from SBA detailing a December 17, 2020, meeting that 
occurred between SBA and a trade association regarding SBA's size 
standard methodology and its calculations used in deriving the proposed 
size standard for engineering services. All comments are available at 
www.regulations.gov (RIN 3245-AG91) and are summarized and discussed 
below.

Comments on Proposed Changes to NAICS 541310--Architectural Services 
and NAICS 541350--Building Inspection Services

    SBA received a total of six comments to its proposal to increase 
the size standard for NAICS 541310 (Architectural Services) from $8 
million to $11 million. All commenters supported an increase to the 
size standard; however, two commenters recommended that SBA adopt a 
larger increase while the remaining four commenters supported 
increasing the size standard to the proposed $11 million level. Of the 
four comments fully supporting the SBA's proposal, three stated that 
the SBA's analysis and proposed $11 million size standard appropriately 
reflect the current industry characteristics and market conditions in 
NAICS 541310. Three commenters also expressed support for the SBA's 
proposed increase to the size standard for NAICS 541350 (Building 
Inspection Services) from $8 million to $10 million but did not provide 
any specific data or analysis relevant to that industry.
    One commenter in support of the SBA's proposed increase to the size 
standard for NAICS 541310 expressed that the current size standard 
makes it difficult for small architectural firms to compete in the 
Federal marketplace upon graduating from the size standard, especially 
when competing with firms that are tens or hundreds of times larger 
than they are. The commenter concluded that the SBA's proposed increase 
would benefit all small

[[Page 18667]]

companies, providing larger small businesses with an opportunity to 
successfully graduate from the size standard while still protecting 
smaller small businesses from competing with dominant firms. Another 
commenter expressed support for the SBA's proposal based on the impacts 
on emerging companies, maintaining that the proposed size standard is 
appropriate, and it will encourage new entrants to the Federal 
marketplace.
    Commenters in support of a size standard higher than the SBA's 
proposed size standard of $11 million for NAICS 541310 included an 
anonymous commenter and an architectural and engineering services firm. 
These commenters recommended that SBA increase the size standard for 
NAICS 541310 to at least $22.5 million to match the proposed size 
standard for NAICS 541330 (Engineering Services). One commenter argued 
that the SBA's proposed size standard does not adequately prepare firms 
graduating from the size standard to compete with larger and more 
established firms under full and open competition. This commenter also 
expressed that a higher size standard is necessary to account for the 
large volume of subcontracting dollars that flow from architectural 
firms to engineering firms and suggested that SBA explore ways to 
modify its definition of receipts to allow for the exclusion of amounts 
paid to third-party subcontractors. Another commenter expressed similar 
concerns to those mentioned above and recommended that SBA establish a 
common size standard between NAICS 541310 (Architectural Services) and 
NAICS 541330 (Engineering Services) to better reflect the similarities 
between the two industries.
SBA's Response
    SBA agrees with commenters that the proposed $11 million size 
standard for NAICS 541310 would benefit all small firms. A larger size 
standard will extend the time that small firms can remain small and 
increase the number of firms eligible for SBA's assistance intended for 
small businesses. As a result of this expanded runway, small firms can 
acquire more experience and technical capabilities to be able to 
compete with larger firms upon graduation from the size standard. 
Moreover, with an expanded pool of small businesses, the Federal 
Government will have more qualified small businesses to choose from, 
and as a result, will likely set aside more contracts for small 
businesses, thereby increasing Federal opportunities for all small 
businesses.
    SBA disagrees with commenters that the size standard for 
Engineering Services should be aligned with other industries, such as 
Architectural Services, that may perform similar activities. Although 
Engineering and Architectural Services are often co-dependent business 
activities, SBA's analysis of these industries, as detailed in Table 4 
of the November 2020 proposed rule, demonstrates that the industry 
structures and economic characteristics of the firms providing 
architectural and engineering services are markedly different, 
justifying a unique size standard for each industry. SBA discusses 
these differences in more detail in the response to comments to NAICS 
541330, below.
    As discussed in detail in the response to comments on NAICS 541330 
(below), as part of the first five-year review of size standards under 
the Jobs Act, SBA proposed a common $19 million size standard for NAICS 
541310, NAICS 541330, and other industries in NAICS Industry Group 5413 
(Architectural, Engineering, and Related Services), which was 
overwhelmingly rejected by commenters on the grounds that these 
industries are vastly different, and each industry should have a unique 
size standard.
    SBA does not agree with commenters that firms just above the 
current or proposed size standard are not competitive in the Federal 
marketplace. SBA analyzed the data from FPDS-NG for fiscal years 2018-
2020 to determine the range of Federal contracting opportunities 
available to architectural firms above the current or proposed size 
standard. These results are presented in Table 2, Distribution of 
Contracting Dollars and Industry Receipts by Firm Size in NAICS 541310. 
SBA's analysis showed that 49.4% of the total dollars obligated to 
NAICS 541310 went to firms below the proposed $11 million size standard 
and 56.6% of the total dollars obligated went to firms below the 
commenters' suggested size standard of $22.5 million. The data shows 
that there is not a disproportionate share of Federal contracting 
opportunities available to firms that have exceeded the size standard. 
For example, based on the FPDS-NG data for fiscal years 2018-20, SBA 
determined that 15.6% of the total dollars obligated to NAICS 541310 
went to firms above the current $8 million size standard but below the 
$22.5 million size standard suggested by commenters. Using the 2012 
Economic Census special tabulation, SBA determined that 18% of total 
industry receipts in NAICS 541310 went to firms above the current $8 
million size standard but below the $22.5 million size standard 
suggested by commenters. Similarly, 50.6% of total contract dollars and 
44.1% of total receipts in NAICS 541310 went to firms above the 
proposed $11 million size standard.

         Table 2--Distribution of Contracting Dollars and Industry Receipts by Firm Size in NAICS 541310
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                                                   Total dollars  Share of total  Total industry  Share of total
        Firm size in receipts ($ million)          obligated ($       dollars       receipts ($      industry
                                                     million)      obligated (%)     million)      receipts (%)
----------------------------------------------------------------------------------------------------------------
<= $8.0.........................................             361            41.0          14,231            50.6
>$8.0 and <= $11.0..............................              74             8.4           1,490             5.3
>$11.0 and <= $22.5.............................              64             7.2           3,568            12.7
>$22.5..........................................             382            43.4           8,840            31.4
                                                 ---------------------------------------------------------------
    Total.......................................             882             100          28,129             100
----------------------------------------------------------------------------------------------------------------

    Thus, based on SBA's methodology for evaluating size standards, SBA 
finds that there are adequate Federal contracting opportunities for 
small firms at the current or proposed size standard that have 
graduated from their small business size status because the share of 
Federal contracting dollars being awarded to small firms in that size 
range is generally proportionate to their respective share of industry 
receipts. Table 2 summarizes these results.
    Regarding the comment that SBA should modify its definition of 
receipts to allow for the exclusion of amounts

[[Page 18668]]

paid to third-party subcontractors (usually referred to as ``pass- 
throughs''), SBA disagrees. SBA does not allow for the exclusion of 
pass-throughs because they are part of the usual and customary costs of 
doing business. SBA acknowledges that the architectural and engineering 
services industries may have more subcontracting costs than other 
industries. Accordingly, SBA considers ``pass-throughs,'' and other 
similar factors, as secondary factors when it establishes small 
business size standards. Specifically, the Economic Census data that 
SBA uses in its size standards analysis includes all revenues received 
by companies, including the values of their subcontracts. If the pass-
throughs were allowed to be excluded from the calculation of receipts, 
SBA would also have to revise its methodology to establish a lower size 
standard to reflect the size of the industry without them. Thus, SBA 
does not believe it is reasonable to exclude these costs from the 
calculation of receipts.
    For the reasons stated above, SBA is adopting the proposed $11 
million size standard for NAICS 541310 without change. Similarly, in 
the absence of opposing comments, SBA is also adopting the $10 million 
size standard for NAICS 541350, as proposed.

Comments on Proposed Changes to NAICS 541330--Engineering Services

    SBA received a total of 45 comments on its proposal to increase the 
size standard for NAICS 541330 (Engineering Services) from $16.5 
million to $22.5 million. Of those 45 comments, 24 expressed support 
for the proposed increase, six opposed the proposal, 14 expressed mixed 
support for the proposal, and one comment was from SBA. Of the 14 
comments expressing mixed support for the SBA's proposed $22.5 million 
size standard for this industry, 12 comments (which were almost 
identical) petitioned SBA to further increase the size standard for 
NAICS 541330 to at least $39.5 million. One of these 12 comments was 
submitted on behalf of the 12 engineering companies, several of which 
also submitted their own comment including more or less the same 
information. The comments also included a submission from SBA detailing 
a meeting that occurred during the comment period between SBA and an 
engineering industry trade association regarding SBA's size standard 
methodology and its calculations used in deriving the proposed size 
standard for the Engineering Services industry. The same trade 
association also submitted its own comment detailing its concerns with 
the data and approach SBA used to analyze the size standard for NAICS 
541330. SBA summarizes these comments and provides its responses below.
Comments Supporting the Proposed $22.5 Million Size Standard
    Of the 45 comments concerning the size standard for NAICS 541330, 
24 fully supported the SBA's proposal to increase that size standard 
from $16.5 million to $22.5 million. Commenters' support for SBA's 
proposal focused on four main arguments: (1) Increasing the size 
standard would allow existing small firms to retain their small 
business status for an extended period; (2) The proposed increase would 
allow firms to gain more experience before graduating from the size 
standard; (3) Increasing the size standard would increase the number of 
small firms and the number of small business set-aside opportunities; 
and (4) The proposed increase accurately reflects the changes to 
industry structure that have occurred since the last review of the size 
standard. SBA discusses these comments and its responses below.
    (1) Increasing the size standard would allow existing small firms 
to retain their small business status for an extended period.
    At least four commenters supported SBA's proposal to increase the 
size standard for NAICS 541330 to $22.5 million on the grounds that it 
would allow small firms to retain their small business status for a 
longer period. These commenters expressed the challenges of competing 
for contracts under full and open competition against firms many times 
greater than the size threshold for the industry, and thus, petitioned 
SBA to adopt the proposed increase so that small firms could retain 
access to SBA's procurement programs for a longer period. Moreover, 
some commenters argued that lowering the size standard, and thus, 
shortening the period that firms could retain their small status, could 
harm the Federal government by reducing the pool of experienced and 
qualified small contractors eligible to help Federal agencies carry out 
their missions.
SBA's Response
    SBA agrees with commenters that its proposal to increase the size 
standard for NAICS 541330 from $16.5 million to $22.5 million will help 
small businesses in the industry, especially those near the size 
standard, to retain access to SBA's procurement and financial 
assistance programs for a longer period. SBA believes that by expanding 
the period for firms to qualify as small, a higher size standard will 
likely benefit the Federal government by increasing the number of 
qualified small businesses eligible for set-aside opportunities. 
Moreover, SBA also believes that the proposed increase will also 
benefit all small businesses in the industry as the Federal Government 
is likely to set aside more contracting opportunities for small 
businesses because of the availability of an expanded pool of 
experienced small firms.
    (2) The proposed increase would allow firms to gain more experience 
before graduating from the size standard.
    A few commenters in support of the proposed increase to the size 
standard for this industry stated that the proposed action would 
benefit existing small firms that are presently approaching the size 
standard by allowing them to gain more qualifications and capabilities 
before graduating from the size standard. These commenters expressed 
the importance of the expanded runway as it would allow existing small 
firms more time to develop their resume, which in turn, would help them 
compete with larger firms under full and open competition upon 
graduation from the small business status. Commenters also discussed 
the impact on small firms of Qualifications-Based Selections (QBS) 
requirements under the Brooks Act. These commenters expressed that the 
QBS criteria, established by the Brooks Act of 1972 (Pub. L. 92-582), 
tend to favor large firms with more qualifications because it requires 
selection based on qualifications alone, with the price negotiated only 
after the most qualified firm is selected. These commenters argued that 
increasing the size standard to $22.5 million would allow existing 
small firms to obtain more project experience and expand the number of 
staff with specialized engineering expertise necessary to be more 
competitive with larger firms under the QBS environment. Other 
commenters expressed similar reasoning in their support for the SBA's 
proposed increase to the size standard for NAICS 541330. For example, 
an engineering firm commented that the SBA's proposal would foster 
robust competition in the Federal market by making it less onerous for 
firms to transition from small to the other-than-small status. One 
architectural firm commented that the current size limits are too small 
for firms to acquire qualifications and capabilities needed to compete 
for medium or large contracting opportunities and expressed

[[Page 18669]]

that the proposed higher size standard would help small businesses 
survive upon graduating from the size standard.
SBA's Response
    SBA agrees with commenters that the proposed size standard would 
allow small firms to gain more qualifications and capabilities before 
graduating from the size standard. Due to this expanded runway provided 
by the higher proposed size standard, firms will be able to acquire 
more experience and technical capabilities to compete with larger firms 
upon their graduation from their small business status. SBA recognizes 
that the Brooks Act is an important factor affecting the competition in 
the Federal marketplace for this industry. SBA believes that, with the 
expanded runway provided by the proposed increase to the size standard, 
small firms will be able to gain more qualifications and experience and 
become more competitive for contracts covered under the Brooks Act.
    (3) Increasing the size standard would increase the number of small 
firms and the number of small business set-aside opportunities.
    Of the 24 comments in support of the proposed increase to the size 
standard for NAICS 541330, four comments expressed support based on the 
proposal's impact on set-aside opportunities. One commenter explained 
that SBA's proposal to increase the size standard for NAICS 541330 
would increase the number of qualified small companies competing for 
contracts in this industry and provide the Government with a more 
robust selection of small businesses for its set-aside requirements. 
Another commenter expressed concerns about the potential consequences 
of not adopting the SBA's proposal and pointed to the current 
distribution of Federal contracts in this industry, which is dominated 
by a few large firms as a symptom that could be exacerbated by a 
failure to adopt the proposed increase to the size standard. Another 
commenter supported the SBA's proposal because it would allow more 
small businesses to win prime contracting opportunities. The commenter 
explained that allowing small businesses to grow to the size that can 
support agency needs as prime contractors will allow agencies to set 
aside more contracts for small businesses.
SBA's Response
    SBA agrees with commenters that the proposed increase to the size 
standard for NAICS 541330 will benefit both small businesses and the 
Federal Government. With an expanded pool of small businesses, the 
Federal Government will have access to more qualified small businesses 
to choose from, and as a result, will likely set aside more contracts 
for small businesses. SBA also agrees with commenters that robust 
competition within the industry will lead to more set-aside 
opportunities and that businesses will have a longer runway to gain 
experience to be able to better compete with large firms upon their 
graduation from the size standard. The proposed change would also 
enable some small businesses that have exceeded the current size 
standard to regain their small business status and qualify for SBA's 
contracting and financial assistance programs. SBA has quantified these 
impacts in the Regulatory Impact Analysis section of this final rule.
    (4) The proposed increase accurately reflects the changes to 
industry structure that have occurred since the last comprehensive 
review of the size standard.
    SBA received six comments in support of the proposed size standard 
expressing that the proposed higher size threshold better reflects the 
existing industry and current market conditions. Specifically, 
commenters argued that increasing the size standard for NAICS 541330 to 
$22.5 million is reflective of increasing the number and size of large 
firms since the last review of that size standard which likely led to 
increases in the values of industry factors, such as the weighted 
average firm size and the Gini coefficient used to calculate the size 
standard. Other commenters expressed support for a higher size standard 
for this industry based on the Federal contracting data showing 
increasing average contract sizes. Finally, one commenter stated that 
they supported the SBA's proposed increase based on the resiliency of 
the industry during the COVID-19 induced economic recession. This 
commenter further explained that they support the proposed increase to 
the size standards for all industries that have not been adversely 
impacted by the COVID-19 pandemic because small firms in these 
industries need to achieve a certain size and level of experience to 
earn set-aside opportunities. The commenter reasoned that an increase 
in the size standard is warranted in this industry to support small 
business growth and promote competition.
SBA's Response
    SBA agrees with commenters that the SBA's proposed increase to the 
size standard for NAICS 541330 better reflects the current economic 
characteristics of the firms within this industry. SBA also agrees with 
commenters that industry consolidation and the growth of large firms 
has the potential to increase the calculated factors for weighted 
average receipts and the Gini coefficient. As detailed in Table 4 of 
the November 2020 proposed rule, the size standards supported by the 
factors for this industry already reflect an industry whose receipts 
distribution is significantly concentrated at the top. As such, SBA 
believes that the proposed size standard for this industry accurately 
reflects the industry structure and economic characteristics of its 
participant firms. SBA also agrees with the comment regarding the 
resiliency of engineering services firms during the COVID-19 related 
economic crisis. Data from FPDS-NG shows that there was an increase in 
dollars obligated to small businesses in this industry during fiscal 
years 2018-2020, which suggests that small firms have continued to do 
well in the Federal marketplace while providing valuable services to 
the Federal Government during the COVID-19 pandemic. Table 3, Dollars 
Obligated to Small Businesses in NAICS 541330, shows the dollars 
obligated to small businesses under NAICS 541330 and the annual growth 
rate during fiscal years 2018-2020. SBA believes that adopting the 
proposed $22.5 million size standard will support the resiliency of 
small businesses in this industry by likely increasing the number of 
set-aside opportunities available and better directing SBA's resources 
to their intended beneficiaries.

     Table 3--Dollars Obligated to Small Businesses in NAICS 541330
------------------------------------------------------------------------
                                    Dollars obligated
                                         to small        Annual growth
            Fiscal year               businesses ($         rate (%)
                                         million)
------------------------------------------------------------------------
2018..............................              8,460

[[Page 18670]]

 
2019..............................              9,417               11.3
2020..............................              9,923                5.4
------------------------------------------------------------------------

Comments Opposing the Proposed $22.5 Million Size Standard
    Commenters opposed to the SBA's proposal included individuals, 
engineering firms, and trade associations. Of the 45 comments received 
regarding the SBA's proposal to increase the size standard for NAICS 
541330 from $16.5 million to $22.5 million, SBA received six comments 
that were totally opposed to the proposed size standard increase. These 
commenters argued that increasing the size standard beyond the current 
level would harm smaller small firms.
    Of the 45 comments regarding the SBA's proposed size standard 
increase for NAICS 541330, six comments were opposed to any increase to 
the size standard. Of these six comments, four supported the current 
$16.5 million size standard and one recommended that the size standard 
be lowered instead of increasing it. These commenters expressed 
concerns that SBA's proposed size standard would harm truly small firms 
by increasing the number of larger small firms competing for set aside 
opportunities. One engineering firm with average annual revenues below 
$6 million expressed that competing against firms with $20 million in 
average annual receipts and an employee count of 100 or more people 
would be difficult for smaller small firms because larger firms have 
experience and resources that smaller small firms do not have. The 
commenter urged SBA to maintain the current size standard or consider a 
micro entity category for this NAICS code. Another commenter with 40 
employees expressed that although they may be considered a larger small 
engineering firm, they support maintaining the size threshold at the 
current level to ensure that smaller small firms continue to benefit 
from SBA's contracting programs. Commenters to this issue did not 
provide any data in support of their position.
SBA's Response
    SBA's proposed increase to the size standard for Engineering 
Services may result in some redistributions of Federal contracts 
between the newly qualified small businesses and large businesses and 
between the newly qualified small businesses and small businesses under 
the current size standard. However, it would have no impact on the 
overall economic activity because total Federal contract dollars 
available for businesses to compete for will not change with changes to 
size standards. Although SBA cannot quantify with certainty the actual 
outcome of the gains and losses from the redistribution of contracts 
among different groups of businesses, it can identify several probable 
impacts in qualitative terms. With the availability of a larger pool of 
small businesses under the proposed increases to the size standard, 
some unrestricted Federal contracts that would otherwise be awarded to 
large businesses may be set aside for small businesses. As a result, 
large businesses may lose some Federal contracting opportunities. 
Similarly, some small businesses under the current size standards may 
obtain fewer set-aside contracts due to the increased competition from 
larger businesses qualifying as small under the proposed increase to 
the size standard. However, this impact may be offset by a greater 
number of procurements being set aside for all small businesses. SBA 
analyzed data from the 2012 Economic Census special tabulation and 
determined that SBA's proposed size standard would increase the total 
number of small firms in the industry by only 344 firms, or 0.8% of the 
44,074 firms that are currently small. Thus, SBA believes that an 
increase in firms of the magnitude described above will not 
significantly disadvantage currently small firms. Moreover, SBA 
analyzed internal data on 7(a) and 504 loans for fiscal years 2018-2020 
and determined that 95.2% of loans were issued to firms one-sixth the 
size of the employee equivalent of the proposed size standard for this 
industry, indicating that the majority of firms receiving SBA's 
financial assistance are much smaller than the current and proposed 
size standard. Thus, SBA does not anticipate that increasing the size 
standard to the proposed $22.5 million level will impact the ability of 
small firms to participate in SBA's financial assistance programs.
Comments Recommending a Higher $39.5 Million Size Standard
    Of the 45 comments relating to the SBA's proposed increase of the 
Engineering Services size standard to $22.5 million, 12 commenters 
maintained that SBA' proposal to increase the size standard is a step 
in the right direction, but the proposed increase is not enough to 
address the challenges small businesses currently face in the Federal 
market. They petitioned SBA to raise the size standard for NAICS 541330 
further to at least $39.5 million, to match the current and proposed 
$39.5 million size standard for NAICS 236220 (Commercial and 
Institutional Building Construction). Support for a higher size 
standard than what SBA proposed focused on four main arguments: (1) The 
Brooks Act qualifies as a unique characteristic in NAICS 541330 and 
should be considered for adjusting the size standard to a higher level 
of $39.5 million; (2) The concentration of Federal contracting dollars 
among the largest firms makes it difficult for small firms to compete 
upon graduating from the current size standard; (3) Increasing use of 
limited competition acquisition vehicles, such as Indefinite Delivery, 
Indefinite Quantity (IDIQ) contracts, Governmentwide Acquisition 
Contracts (GWAC), and Best-In-Class (BIC) contract vehicles favors 
large businesses; and (4) Increasing the size standard significantly 
will allow the Government to set aside more requirements for small 
businesses. SBA discusses the concerns raised by these commenters and 
its responses, below.
    (1) The Brooks Act qualifies as a unique characteristic in the 
541330 industry and should be considered for adjusting the size 
standard to a higher value of at least $39.5 million.
    Twelve commenters in favor of a higher size standard for NAICS 
541330 recommended that SBA raise the size standard to $39.5 million 
based on the unique characteristic in the industry created by the 
Brooks Act. The commenters maintained that the Brooks Act establishes a 
qualifications-based selection (QBS) process, in which architectural 
and engineering (A&E) services contracts are negotiated solely

[[Page 18671]]

on the basis of demonstrated competence and qualification for the type 
of professional services required at a fair and reasonable price. One 
comment submitted on behalf of a group of 12 engineering firms 
expressed that to be competitive in an environment where the Brooks Act 
is predominantly used in the acquisition process, the A&E firms must 
compete solely based on capabilities, which can be directly tied to the 
number of professionals a firm has and past projects that the firm has 
successfully completed. Thus, the commenters recommended that SBA 
should consider the Brooks Act as an additional factor for adjusting 
the size standard to a higher value to help small firms overcome the 
bias towards larger firms for contracts subject to the Brooks Act 
requirement. Along with their comments, the group provided a white 
paper which included the data showing the dollars obligated to NAICS 
541330 relative to other industries, total contract awards by vendor, 
market concentration of prime contracts, and the distribution of 
contracts by types and vehicles. Another engineering firm, which 
expressed agreement with the comments submitted by the group of 12 
engineering firms expressed that a size standard of $39.5 million is 
necessary and proper to establish an environment where small businesses 
can compete, grow, and successfully transition to other-than-small 
status.
SBA's Response
    SBA appreciates the informed comments submitted by commenters to 
this issue. SBA has reviewed the data provided by the commenters and 
determined that the data largely agrees with data that SBA evaluated in 
determining the proposed size standard for this industry. However, 
although the data provided to SBA are sufficient to demonstrate the 
concentration of Federal contracting dollars among a handful of large 
firms, the data does not demonstrate that SBA's current or proposed 
size standard for NAICS 541330 would have an adverse impact on the 
ability of small firms to compete for Federal contracting opportunities 
in that industry. Moreover, SBA does not agree with commenters' 
statements that the Brooks Act disadvantages small firms. They did not 
provide any empirical data supporting their arguments that the QBS 
process under the Brooks Act favors large businesses to the detriment 
of small businesses under the current or proposed size standard. SBA 
believes that the Brooks Act may have the opposite effect, increasing 
opportunities for smaller firms by removing the emphasis on low price. 
This leads to increased opportunities for smaller firms that may be 
able to better compete with larger firms on the grounds of their niche 
market expertise, knowledge of local rules and regulations, and greater 
involvement of experienced and specialized staff. SBA's analysis of the 
Federal contracting factor for this industry supports this conclusion.
    As detailed in Table 4 of the November 2020 proposed rule, the size 
standards associated with the weighted average firm size and the Gini 
coefficient factors already reflect an industry in which receipts are 
significantly concentrated at the top of the size distribution. 
However, regarding the Federal contracting factor, SBA found that, 
under the current $16.5 million size standard, the small business share 
of Federal contracting dollars in this industry was greater than the 
small business share of total industry receipts. Thus, based on its 
methodology for evaluating size standards and the latest data, SBA 
determines that the current size standard of $16.5 million is 
appropriate with respect to the Federal contracting factor. SBA 
believes that increasing the size standard to the proposed $22.5 
million level based on the analysis of all factors may increase the 
number of set-asides in this industry and further benefit the small 
firms that are already well-represented in the Federal contracting 
market at the current size standard. As such, SBA does not believe that 
it would be appropriate to increase the size standard for this industry 
based solely on the requirements of the Brooks Act because the latest 
data does not show that small firms are significantly disadvantaged as 
a result of the requirements of this law.
    (2) The concentration of Federal contracting dollars among the 
largest firms makes it difficult for small firms to compete upon 
graduating from the current size standard.
    At least eight commenters recommended a higher $39.5 million size 
standard for NAICS 541330 based on the belief that both the current and 
proposed size standard levels would disadvantage graduating small firms 
(larger small firms) that would be competing with much larger firms 
under full and open competition. The commenters added that a firm 
graduating from the current or proposed size standard cannot be 
competitive in the full and open marketplace. They maintained that 
almost 50% of total contract dollars in NAICS 541330 in DOD and more 
than 70% of the same at NASA and DOT went to the top 10 businesses. The 
commenters argued that the Brooks Act has caused this industry to be 
dominated by 10 large firms, making it nearly impossible for small 
businesses to compete for Federal opportunities upon graduation from 
the size standard. The comments maintained that that a larger increase 
to the size standard is warranted to ensure that small firms are able 
to gain the experience and capabilities necessary to successfully 
compete with larger firms upon graduation from small business status.
SBA's Response
    In response to the comments, SBA analyzed the data from FPDS-NG for 
fiscal years 2018-2020 to determine the range of Federal contracting 
opportunities available to firms above the current or proposed size 
standard. SBA's analysis showed that 18.6% of the total dollars 
obligated to NAICS 541330 went to firms below the proposed $22.5 
million size standard and 25.2% of the total dollars obligated to that 
industry went to firms below the commenters' suggested size standard of 
$39.5 million. Moreover, the data shows that there is not a 
disproportionate share of Federal contracting opportunities available 
to firms that have exceeded the size standard as compared to their 
share of total industry receipts. For example, based on the FPDS-NG 
data for fiscal years 2018-2020, SBA determined that 9.5% of the 
average annual total dollars obligated to NAICS 541330 went to firms 
above the current $16.5 million size standard but below the $39.5 
million size standard suggested by commenters. Using the special 
tabulation of the 2012 Economic Census, SBA estimated that 7.9% of 
total industry receipts in NAICS 541330 was accounted for by firms 
above the current $16.5 million size standard but below the $39.5 
million size standard suggested by commenters. Thus, based on SBA's 
methodology for evaluating a size standard for the Federal contracting 
factor, SBA finds that there are adequate Federal contracting 
opportunities for firms that have recently graduated from the size 
standard because the share of Federal contracting dollars to firms in 
that size range is proportionate to their respective share of industry 
receipts. Table 3, Distribution of Contracting Dollars and Industry 
Receipts by Firm Size in NAICS 541330, summarizes these results.

[[Page 18672]]



         Table 3--Distribution of Contracting Dollars and Industry Receipts by Firm Size in NAICS 541330
----------------------------------------------------------------------------------------------------------------
                                                   Average total                     Industry
                                                      dollars     Share of total  receipts (2012  Share of total
        Firm size in receipts ($ million)            obligated        dollars        economic        industry
                                                   (FPDS-NG) ($    obligated (%)    census) ($     receipts (%)
                                                     million)                        million)
----------------------------------------------------------------------------------------------------------------
<= $16.5........................................           5,527           15.70          50,570           24.30
>$16.5 and <= $22.5.............................           1,022            2.90           5,886            2.80
>$22.5 and <= $39.5.............................           2,334            6.60          10,584            5.10
>$39.5..........................................          26,377            74.8         141,083            67.8
                                                 ---------------------------------------------------------------
    Total.......................................          35,260           100.0         208,124           100.0
----------------------------------------------------------------------------------------------------------------

    Based on the above results, SBA does not agree with commenters that 
a deviation from the calculated size standard is necessary to ensure 
that small firms are able to compete once they graduate from the size 
standard. Moreover, SBA believes that increasing the size standard to 
$22.5 million will extend the runway for small firms to grow and 
increase their ability to compete for larger contracts while also 
maintaining a fair and competitive playing field for the 96.8% of firms 
in this industry that are small at the proposed $22.5 million size 
standard.
    (3) Increasing use of limited competition acquisition vehicles, 
such as Indefinite Delivery, Indefinite Quantity (IDIQ) contracts, 
Governmentwide Acquisition Contracts (GWAC), and Best-In-Class (BIC) 
contract vehicles favors large businesses.
    Almost all in the group of commenters recommending a higher $39.5 
million size standard argued that the increased use of limited 
competition vehicles, such as Indefinite Delivery, Indefinite Quantity 
(IDIQ) contracts, Governmentwide Acquisition Contracts (GWACs), and 
Best-in-Class (BIC) contracts, by Federal agencies increases the number 
of opportunities for large Federal contractors to the detriment of 
small businesses. The commenters maintained that over 70% of the total 
spend in NAICS 541330 goes through limited competition vehicles, such 
as IDIQ, GWAC, and BIC vehicles. The commenter added that small 
businesses graduating from the current size standard cannot be 
competitive in full and open IDIQ contracts and that the proposed $6 
million increase is not adequate to appropriately alleviate this issue, 
which is why a more significant size standard increase is necessary to 
allow firms to be successful in capturing IDIQ contracts.
SBA's Response
    Consolidated buying strategies--such as relying on GWACs and BIC 
contracts--favor incumbent and established government vendors, but SBA 
does not believe that those strategies unequivocally favor large 
businesses over small businesses. Authority from the Small Business 
Jobs Act of 2010 permits agencies to issue set-aside orders off of IDIQ 
contracts, and some court decisions have applied mandatory small-
business preferences to those vehicles. Additionally, certain GWACs are 
available exclusively to small businesses. This includes vehicles that 
are either entirely set aside for SBA socioeconomic program 
participants or feature pools exclusively for SBA-certified firms. That 
said, when agencies consider these limited-competition vehicles, they 
must continue to prioritize small-business contracting ahead of 
consolidating their contracts. In its recent Memorandum No. M-22-03 on 
``Advancing Equity in Federal Procurement'', the Office of Management 
and Budget (OMB) emphasized that agencies must not use BIC contracts 
where doing so might threaten the agency's small business goals or the 
growth of the small-business supplier base. OMB also reformed the 
Category Management program--of which GWACs all are a part of--to 
designate all socioeconomic small businesses as Tier 2. SBA believes 
that these measures may ameliorate some the challenges small businesses 
in NAICS 541330 face from increased use of IDIQs, GWACs and BICs.
    (4) Increasing size standard will significantly allow the 
Government to set aside more requirements for small businesses.
    The commenters stated that increasing the size standard to the 
$39.5 million level will allow a significant number of businesses to 
qualify as small, thereby expanding a pool of qualified small 
businesses, which would, in turn, encourage the Government to set aside 
more contracts for small businesses. This will, as the commenters 
added, spur more competition amongst small businesses, which leads to 
the improvement in the quality of services being delivered to the 
Government buyer. The commenters asserted that their proposed 
significant increase to the size standard would not negatively impact 
small businesses under the current size standard when competing for 
Federal opportunities.
SBA's Response
    SBA agrees with the commenters' position that increasing the size 
standard to $39.5 million would allow significant number of businesses 
above the current or SBA's proposed size standard to qualify as small 
and become eligible for Federal opportunities intended for small 
businesses. However, SBA is concerned that, by allowing significantly 
larger and more qualified and resourced companies above the current or 
proposed size standard to qualify as small, the commenters' proposed 
$39.5 million size standard (which is almost 140% increase from the 
current $16.5 million and more than 75% increase from the SBA's 
proposed $22.5 million size standard) would likely negatively impact 
smaller small businesses when competing for Federal opportunities. The 
commenter argued that increasing the size standard will not hurt small 
businesses below the current size standard, but they did not provide 
any data or analysis supporting their argument.
    The commenters recommended to increase the size standard for NAICS 
541330 to not less than $39.5 million, but they did not provide any 
specific industry data or analysis justifying why the size standard 
should be increased to that level, except for suggesting to make it at 
par with the size standard for NAICS 236220 (Commercial and 
Institutional Building Construction). The results of the SBA's analysis 
of the industry and Federal contracting factors, shown in Table 4 of 
the November 2020 proposed rule, supported a size standard of $25.5 
million for NAICS 236220, a decrease from the current $39.5 million 
size standard. However, in accordance with its policy of not lowering 
any size standard in the current environment due to the COVID-

[[Page 18673]]

19 pandemic, SBA proposed to retain the current $39.5 million for NAICS 
236220.
    Based on the 2012 Economic Census, 96.8% of all firms in NAICS 
541330 would qualify as small under the SBA's proposed $22.5 million 
size standard, which would provide an adequate and robust pool of 
qualified and competitive small businesses for the Government to choose 
from for their se-aside requirements. Increasing the size standard to 
the commenters' proposed $39.5 million level would add another 400-500 
firms as small in the Federal marketplace, thereby increasing 
competition for SBA's programs and resources which may hurt smaller 
small businesses under the current size standard. For these reasons, 
SBA is not adopting the $39.5 million as the size standard for NAICS 
541330.
Comments Raising Other Issues
    SBA received several comments raising other issues on its proposal 
to increase the size standard for NAICS 651330 from $16.5 million to 
$22.5 million. These commenters recommended that SBA establish a common 
size standard between Engineering Services and other related 
industries, offered recommendations and submitted questions regarding 
SBA's analysis of the engineering size standard. SBA discusses these 
comments and its responses below.
    (1) SBA should establish a common size standard between Engineering 
Services and other related industries.
    Nine commenters to the proposed rule suggested that SBA establish a 
common size standard between Engineering Services and other related 
industries, namely NAICS 541310 (Architectural Services) and NAICS 
236220 (Commercial and Institutional Building Construction). Similarly, 
SBA received a comment from a group of 12 engineering firms, requesting 
that SBA increase the size standard for NAICS 541330 to at least $39.5 
million to match the size standard for NAICS 236220. Another commenter, 
an architecture and engineering firm, recommended aligning the size 
standard for Engineering Services with the size standard for 
Architectural Services, arguing that these two NAICS codes are 
intertwined and in effect one and the same industry. This commenter 
explained that contracting officers may sometimes misclassify contracts 
due to the similarities and interdependence between the two NAICS 
codes. Thus, a common size standard would help to eliminate any 
disparities that may result from an incorrect selection of the NAICS 
code. The commenter also pointed to the difference in the amounts of 
dollars obligated between NAICS 541310 and NAICS 541330 as evidence of 
the incorrect classification of A&E contracts, arguing that the more 
widespread use of NAICS 541330 with a larger size standard was 
responsible for that difference.
SBA's Response
    SBA does not agree with commenters that the size standard for 
engineering services should be aligned with the size standards for 
industries that seem to perform related activities. Although the firms 
in engineering and architectural services industries may perform co-
dependent and related business activities, SBA's analysis of these 
industries, as detailed in Table 4 of the November 20 proposed rule, 
demonstrates that their industry structures and the economic 
characteristics of the respective firms are markedly different, thereby 
justifying a unique size standard for each industry. For example, 
engineering firms are significantly larger than architectural firms 
based on simple and weighted average firm size (engineering firms are 
roughly three times larger based on the simple average firm size and 25 
times larger based on the weighted average firm size). Engineering 
firms have three times as many average assets and a more top-heavy 
industry concentration in terms of both receipts and Federal contract 
dollars. Likewise, the Commercial and Institutional Building 
Construction industry is also significantly different from Engineering 
Services industry, particularly with respect to weighted average firm 
size and industry concentration of Federal contract dollars. Thus, SBA 
believes that creating a common size standard between Engineering and 
Architectural Services and between Engineering Services and Commercial 
and Institutional Building Construction would be inconsistent with 
differences in industry factors used in evaluating the size standards 
in those industries.
    It is ultimately the responsibility of the contracting officer to 
designate the proper NAICS code based on the principal purpose of the 
product or service being acquired (13 CFR 121.402(b)). SBA does not 
believe that the size standard is an appropriate tool to address the 
issue of an incorrect NAICS code selection in a solicitation. SBA has 
established a process for interested parties to appeal with SBA's 
Office of Hearings and Appeal (OHA) a contracting officer's NAICS code 
designation in its regulations at 13 CFR 121.1101. SBA encourages 
impacted firms to use this process when they believe that a contracting 
officer has categorized a solicitation under an improper NAICS code.
    As part of the first five-year review of size standards under the 
2010 Jobs Act, SBA proposed a common $19 million size standard for all 
industries within NAICS Industry Group 5413 (Architectural, 
Engineering, and Related Services), including NAICS 541310 
(Architectural Services) and NAICS 541330 (Engineering Services) (76 FR 
14323 March 6, 2011)). A vast majority of comments concerning the 
proposed size standard for NAICS 541310 opposed the establishment of 
the common size standard between Architectural and Engineering Services 
industries on the grounds that architectural firms are, on average, 
much smaller than their engineering counterparts and that the common 
size standard would hurt the smaller small architectural firms in 
competing for Federal contracting opportunities. A detailed discussion 
of these comments can be found in the SBA's final rule (77 FR 7489 
(February 10, 2012)).
    For the above reasons, SBA is maintaining separate size standards 
for NAICS 541310, 541330, and 236220, as proposed. Specifically, in 
this final rule, SBA is adopting the proposed $11 million size standard 
for NAICS 541310 (Architectural Services) and the proposed $22.5 
million size standard for NAICS 541330 (Engineering Services. 
Similarly, in a separate rulemaking (85 FR 62372 (October 2, 2020)), 
SBA proposed to retain the current $39.5 million size standard for 
NAICS 236220, which SBA adopted in the corresponding final rule (RIN 
3245-AG90).
    (2) Recommendations and questions regarding SBA's analysis of the 
size standard for NAICS 541330.
    Ten commenters raised questions or offered other recommendations 
regarding SBA's analysis of size standard for NAICS 541330 (Engineering 
Services). One engineering trade association representing more than 
5,500 engineering firms and 600,000+ engineers, surveyors, architects, 
and other specialists nationwide recommended that SBA create additional 
size standards (in addition to the existing four) under NAICS 541330 to 
account for the wide spectrum of engineering disciplines (such as 
civil, electrical, mechanical, environmental, structural, etc.) and 
services offered by this industry. The association asserted that it is 
critical to understand the differences between engineering services 
related to physical infrastructure projects (such as buildings, wells, 
dams, mines, canals,

[[Page 18674]]

and roads, etc.) and other engineering activities related to the 
design, development, and utilization of machines, materials, 
instruments, processes, and systems. The association further explained 
that in order to establish a meaningful size standard for the Brooks 
Act covered engineering industry involved with physical infrastructure 
projects for Government and public works entities, the sector's data 
needs to be separated from the manufacturing and management firms and 
separate size standards be developed. It expressed concerns over the 
use of combined data gathered from disparate sectors of the engineering 
services industries and recommended that SBA obtain sufficient 
information from the Department of Commerce to overcome the issues it 
raised and propose appropriate size standards for the Brooks Act 
covered Engineering Services segment and the rest of the industry.
    Another commenter questioned why SBA proposed to increase the size 
standard for the general NAICS 541330 industry but decrease the size 
standard for its Military and Aerospace Equipment and Military Weapons 
exception. The commenter inquired whether SBA's analysis showed similar 
pressures on the parameters that impact size standards for the general 
engineering industry and the exception, and it suggested that the 
pressures are generally the same between the industries. The commenter 
requested that SBA provide a more detailed explanation of how the 
proposed size standards for these industries were determined.
    Finally, eight commenters suggested that SBA increase the size 
standard for this industry to at least $25 million based on SBA's 2011 
proposal to increase the size standard for industries in the NAICS 
Industry Group 5413 to $19 million (76 FR 14323 (March 16, 2011)) and 
inflation since then. The commenters argued that adjusting the proposed 
$19 million size standard from 2011 to present day at an annual 
inflation rate of 3% would suggest that the revised size standard for 
NAICS 541330 should be at least $25 million.
SBA's Response
    In response to the comment that SBA should create additional size 
standard exceptions under NAICS 541330 to better reflect the differing 
characteristics and specializations of engineering firms, SBA surveyed 
the alternative data sources available from the U.S. Census Bureau and 
determined that the available data was not sufficient to conduct a size 
standard analysis for the different segments of the engineering 
industry as suggested by the commenter. As explained in the proposed 
rule, SBA's primary source of industry data for evaluating industry 
characteristics and developing size standards is a special tabulation 
of the latest Economic Census from the Census Bureau. The data from the 
special tabulations are limited to the 6-digit NAICS industry level, 
and hence, do not provide separate data to evaluate a size standard at 
the subindustry level. SBA was not able to find other sources of data 
detailed enough to accurately capture the economic characteristics and 
industry composition of engineering firms. To account for different 
services and specializations that engineering firms provide, SBA has 
already established three subindustries (or exceptions) under NAICS 
541330, in addition to the size standard for the general engineering 
industry.
    The Economic Census is the most comprehensive industry data source 
that provides information across all industries under its scope, using 
uniform definitions and measures that allow for consistent industry 
comparisons at the same moment in time. Because the firm size 
distribution does not change drastically from one Economic Census to 
the next, the data retains its usefulness even if it is not produced in 
a recent year. SBA recently received a preliminary tabulation based on 
2017 Economic Census. Comparing with the newer data, SBA found that the 
industry structure for NAICS 541330 has not drastically changed from 
the 2012 data. For example, SBA found that based on the 2012 Economic 
Census, 3% of firms earned receipts more than $25 million, accounting 
for 71.8% of total industry receipts. Based on the 2017 preliminary 
tabulation, 3.5% of firms earned receipts more than $25 million, 
accounting for 70.8% of total industry receipts.
    In response to the comment questioning the SBA's rationale for 
increasing the size standard for the general NAICS 541330 industry but 
decreasing the size standard for one of the exceptions to that NAICS 
code, namely the Military and Aerospace Equipment and Military Weapons 
exception, SBA would like to clarify that while the calculated size 
standard for this exception was $39 million, a decrease from the 
current size standard, SBA proposed to retain the current $41.5 million 
size standard. In view of the effects of the COVID-19 pandemic on small 
businesses and Federal Government efforts to provide relief to small 
businesses and the overall economy, SBA proposed to maintain the 
current size standards for all industries where the analytical results 
suggested decreases and to increase the size standards for all 
industries where analytical results suggested increases. Although firms 
in the general NAICS 541330 industry and those in the exceptions may 
perform related business activities, SBA's analyses of the industry and 
exception, as detailed in Table 4 of the November 2020 proposed rule, 
demonstrates that their industry structures and the economic 
characteristics of the firms are markedly different. Regarding the 
exception specifically, the calculated size standard was lower than the 
current and proposed size standard due to a lower size standard 
supported by the four-firm ratio which decreased the average of all 
size standards supported by all factors for this industry exception 
from $41.5 million to $39 million. Similarly, for the general NAICS 
541330, the four-firm ratio supported a size standard of only $12 
million, the smallest of all size standards supported by any factor for 
this industry. As such, SBA's analysis shows that some of the same 
pressures do exist for the portion of work covered under the exception 
as in the general industry.
    In response to comments that the size standard for this industry 
should be raised to at least $25 million based on inflation and SBA's 
2011 proposal to increase the size standard to $19 million, SBA 
reviewed the recent history of changes to size standards for NAICS 
541330 and found that the size standard for this industry has been 
adjusted appropriately since 2011. As stated by the commenters, in a 
March 2011 proposed rule, SBA proposed to establish a $19 million size 
standard for this industry (76 FR 14323 (March 16, 2011)). However, in 
a final rule issued in February 2012, SBA adopted a lower size standard 
of $14 million in response to public comments (77 FR 7489 (February 10, 
2012)). Since proposing the $19 million size standard in 2011, SBA has 
issued two inflation adjustments to its monetary-based size standards, 
of which both applied to the size standard for this industry as well. 
Had SBA adopted the $19 million size standard in 2012, the first 
inflation adjustment, effective in July 2014 and adopted in a final 
rule in 2016, would have increased the size standard to $20.5 million 
(81 FR 3949 (January 25, 2016)). The second inflation adjustment 
effective in August 2019, would have further increased the $20.5 
million size standard to $22 million (84 FR 34261 (July 18, 2019)). As 
such, SBA disagrees with commenters that the proposed size

[[Page 18675]]

standard found in the March 2011 proposed rule would justify a $25 
million size standard today based on inflation since then. SBA also 
disagrees with the merits of using the $19 million size standard as a 
basis for inflation adjustment since SBA did not adopt the $19 million 
size standard in its February 2012 final rule.
    SBA also submitted a comment detailing a meeting that occurred 
between SBA and an engineering trade association regarding SBA's size 
standard methodology and its calculations involved in deriving the size 
standard for engineering services. The meeting occurred virtually on 
December 17, 2020 and was attended by the association's Size Standard 
Working Group, a senior economist from SBA's Office of Size Standards, 
and an attorney from SBA's Office of General Counsel. SBA 
representatives listened to the concerns of the association and 
addressed four questions the organization forwarded to SBA prior to the 
meeting on the topic of how the calculations of the proposed size 
standard for the Engineering Services industry were done. The 
association asked SBA to provide details on the weighting of primary 
factors under the SBA's size standard methodology, the impact of the 
COVID-19 pandemic on the review of size standards, and the status of 
the 2017 Economic Census special tabulation. Additionally, SBA 
representatives listened to other questions and concerns related to the 
current proposed rule, especially concerns related to the skewing of 
calculations due to possible misclassifications of large firms under 
NAICS 541330. In response to these questions, SBA explained the 
formulas used to calculate the proposed size standard, including the 
weighting of factors, using NAICS 541330 as an example. SBA also 
explained that in response to the economic impacts of the COVID-19 
pandemic, SBA did not make adjustments to the size standard methodology 
itself, however, in the proposed rule, SBA proposed to maintain current 
size standards in all industries for which the analysis supported a 
decrease to size standards to ensure that small businesses would not 
lose access to SBA assistance during the pandemic. Regarding the status 
of the special tabulation of the 2017 Economic Census which SBA uses to 
evaluate size standards, SBA explained that the data were not yet 
available and thus, SBA is still using the 2012 Economic Census 
tabulation for the evaluation of size standards. Detailed meeting 
minutes, including SBA's responses to the questions posed by the 
association, can be found as one of the comments to the proposed rule 
at www.regulations.gov.
Summary of the Discussion of Comments to NAICS 541330
    Based on its analysis of industry data and the comments received, 
SBA is adopting the size standard of $22.5 million for NAICS 541330, as 
proposed. SBA believes that the $22.5 million is the appropriate size 
standard for this industry and will further benefit the small firms 
that are already well represented in the Federal marketplace at the 
current size standard by increasing the potential for more set-aside 
opportunities and expanding the runway to grow and become more 
competitive under full and open competition upon exceeding the size 
standard. A higher size standard will also provide the Government with 
access to better services through robust competition, while fostering 
growth of small businesses in this industry.

Comments on Proposed Changes to NAICS 541611--Administrative Management 
and General Management Consulting Services & NAICS 541990--All Other 
Professional, Scientific and Technical Services

    SBA received two nearly identical comments to its proposal to 
increase the size standards for NAICS 541611 (Administrative Management 
and General Management Consulting Services) and NAICS 541990 (All Other 
Professional, Scientific and Technical Services) from $16.5 million to 
$21.5 million and $17 million in average annual receipts, respectively. 
One of the comments was submitted on behalf of 12 organizations and the 
other comment was submitted on behalf of two organizations.
    The commenters maintained that the proposed increases to size 
standards for these NAICS codes are not adequate. They recommended that 
the size standards for both industries should be increased to $27.5 
million, which will allow small businesses in those industries to 
successfully graduate from the small business programs. They stated 
that firms graduating at the current size standards do not have the 
financial resources and other capabilities to successfully compete 
against the most dominant firms. The commenters explained that Federal 
spending has trended towards consolidation of procurements, with 
agencies embracing GWACs and BIC vehicles, a policy that favors large 
businesses to the detriment of small businesses. Mid-sized or newly 
graduated firms are not, and cannot be, competitive against the large 
firms when competing for GWACs or BICs or in the full and open 
marketplace. In order to be competitive with the largest firms in the 
full and open marketplace and on GWACs and BICs, as the comments 
explained, firms need to have significant financial capacity and other 
resources, none of which can be accomplished at the current or proposed 
size standards.
    The commenters agreed with SBA's proposal to increase the size 
standards for these industries but argued that SBA should increase both 
size standards by a larger amount to $27.5 million. The commenters 
expressed that a common size standard of $27.5 million in those 
industries is necessary to prevent ``NAICS shopping'' by contracting 
officers who may sometimes take advantage of ambiguities in NAICS code 
definitions by choosing to classify a contract under a NAICS code based 
on their own individual preferences instead of selecting the NAICS code 
based on the primary purpose of the acquisition, as required by law. 
The commenters expressed that increasing the size standard in those 
industries would also increase the competitiveness of small firms 
participating in the Federal marketplace, specifically for 
opportunities with a place of performance Outside of the Continental 
United States (OCONUS). The commenters explained that small business 
set-asides in these industries are rare and full and open awards are 
dominated by the largest firms. The commenters noted that OCONUS 
contracts have continued to grow larger and larger, causing firms to 
prematurely outgrow their size standards, and this ``early graduation'' 
does not allow the newly graduated firm to be competitive in the full 
and open marketplace, which is dominated by the largest companies. The 
commenters expressed that less than 10% of OCONUS work is awarded to 
small businesses.
    The commenters maintained that higher size standards will extend 
the runway for firms to expand their resources and build capacity in 
order to be more competitive upon graduation from the small business 
size status. To achieve Congress' intent to maximize small business 
participation in the Federal marketplace, a significantly higher size 
standard of $27.5 million is needed for both NAICS 541611 and NAICS 
541990, the comment added. Increasing the size standards substantially 
will increase the portfolio of firms that are available to the 
government buyer for set-aside opportunities. This will, the commenter

[[Page 18676]]

added, in turn increase competition, increase the number of set-asides, 
expand opportunities for all small firms, and provide better services 
to the Government.
    In support of their positions, the commenters provided data showing 
OCONUS contract awards classified under NAICS 541611 and NAICS 541990, 
and the distribution of OCONUS contracts by type of contracts and 
agency.
SBA Response
    Generally, SBA believes that it is not always appropriate to 
evaluate industries under a common size standard even when the business 
activities of the industries are similar or co-dependent. Section 
3(a)(7) of the Small Business Act restricts the establishment of a 
common size standard beyond a grouping of industries at the four-digit 
NAICS level. Here, NAICS 541611 and NAICS 541990 belong to different 
four-digit NAICS industry groups and thus are ineligible for a common 
size standard. Specifically, NAICS 541611 belongs to NAICS Industry 
Group 5416 (Management, Scientific, and Technical Consulting Services) 
and NAICS 541990 falls under NAICS Industry Group 5419 (Other 
Professional, Scientific, and Technical Services). Moreover, in 
establishing or approving a common size standard for a grouping of 4-
digit NAICS codes, the law requires SBA to make publicly available, not 
later than the date on which such size standard is established or 
approved, a justification demonstrating that such size standard is 
appropriate for each individual industry classification included in the 
grouping.
    Furthermore, SBA's analysis of industry factors often shows 
important distinctions between industries which, based on SBA's size 
standards methodology, may produce different size standards for 
industries, which seem to represent similar or related business 
activities. NAICS 541611 and NAICS 541990 exemplify this point well. 
Although there may be some overlap in the work performed under these 
industries, there are also significant differences between the two. For 
example, as shown in Table 4 of the November 2020 proposed rule, the 
weighted average firm size for NAICS 541611 is $2.5 billion which 
supports a size standard of $41.5 million, whereas the weighted average 
firm size for NAICS 541990 is only $194 million which supports a size 
standard of $14 million. Also, the Gini coefficient for NAICS 541611 is 
0.824, which supports a size standard of $33 million, whereas the Gini 
coefficient for NAICS 541990 is 0.784, which supports a size standard 
of $26 million. The results of these factors alone show that these 
industries have differing economic characteristics; thus, SBA believes 
that it is appropriate to evaluate the size standards for these 
industries separately. Moreover, under the Small Business Act (15 
U.S.C. 632(a)), SBA's Administrator is responsible for establishing 
small business size definitions (or ``size standards'') and ensuring 
that such definitions vary from industry to industry to reflect 
differences among various industries.
    SBA also reviewed the System for Award Management (SAM) data for 
fiscal year 2020 and found that only about 26% of firms registered 
under NAICS 541611 as the primary industry were registered under NAICS 
541990 as one of their secondary NAICS codes. Similarly, only 23% of 
firms registered under NAICS 541990 as the primary industry were 
registered under NAICS 541611 as a secondary industry. Although these 
percentages demonstrate that there is some overlap between the two 
industries, they also show that most firms do not report participation 
in both industries. For the reasons detailed above, SBA does not agree 
with commenters that there should be a common size standard between 
these two industries.
    SBA's regulations require contracting officers to designate the 
proper NAICS code for a solicitation based on the principal purpose of 
the product or service being acquired (13 CFR 121.402(b)). As stated 
previously, SBA's regulations in 13 CFR 121.1101 allow interested 
parties to appeal with the SBA's Office of Hearings and Appeal (OHA) a 
NAICS code designation made by a contracting officer. SBA encourages 
the impacted firms to follow the procedures outlined in the SBA's 
regulations when they believe that a contracting officer has 
categorized a solicitation under an improper NAICS code. As stated 
previously, the size standard is not an appropriate tool for addressing 
the issue of misclassifying a solicitation using an incorrect NAICS 
code.
    In response to the comment that SBA should further increase the 
size standards for both NAICS 541611 and NAICS 541990 to help small 
businesses compete for OCONUS contract opportunities, SBA reviewed the 
data provided by the commenters and performed its own analysis of 
OCONUS awards to these industries using the FPDS-NG data for fiscal 
years 2018-2020. SBA found that, for NAICS 541611, the average annual 
total dollars obligated to firms through OCONUS awards are not a 
substantial portion of the overall total dollars obligated to that 
industry, with only 6% of the $11.8 billion in average annual total 
dollars being obligated to OCONUS awards. Similarly, for NAICS 541990, 
about 22% of the $9.9 billion in average annual total dollars obligated 
were classified as OCONUS awards. SBA found that small businesses did 
not receive a large share of OCONUS awards under these industries. For 
example, only 22.5% of OCONUS awards in NAICS 541611 and only 9.3% of 
OCONUS awards in NAICS 541990 were awarded to small businesses. By 
comparing these results to the small business share of industry 
receipts for these industries, (35.8% for NAICS 541611 and 52.3% for 
NAICS 541990), SBA determined that small businesses are 
underrepresented in this particular segment (OCONUS contracts) of the 
Federal contracting market within these industries. This 
underrepresentation is also reflected in the broader contracting data 
in NAICS 541990, but not in NAICS 541611. For example, SBA calculated a 
Federal contracting factor of 4.8% for NAICS 541611 and -34.1% for 
NAICS 541990, which support the size standards of $16.5 million and 
$23.0 million, respectively. Thus, SBA agrees with commenters that 
based solely on the Federal contracting factor, a higher size standard 
is supported for NAICS 541990 compared to the SBA's proposed $17 
million size standard. However, SBA's ``Size Standards Methodology'' 
does not provide for the weighting of a specific factor more than 
others. In other words, the methodology establishes that SBA will give 
equal weight to all five primary factors that are considered in the 
evaluation of an industry size standard. Thus, SBA believes that the 
proposed size standards for these industries, which are based on SBA's 
evaluation of industry and Federal contracting factors, already reflect 
the commenters' concerns regarding the issue of a low small business 
participation in the Federal marketplace in these industries.
    SBA agrees with commenters that increasing the size standards for 
these industries will extend the runway for small firms to grow and 
increase their ability to compete for larger contracts while also 
maintaining a fair and competitive playing field for firms that are 
small under the current size standards for these industries. Based on 
the 2012 Economic Census data, 98.4% of firms in NAICS 541611 and 98.6% 
of firms are already small under the current $16.5 million size 
standard. At the proposed size standards of $21.5

[[Page 18677]]

million for NAICS 541611 and $17 million for NAICS 541990, those 
percentages increase to 98.7% and 98.9%, respectively. SBA is concerned 
that increasing these size standards further may hurt smaller small 
businesses when competing for Federal set-aside opportunities.
    For the reasons presented above, SBA accepts the analytical results 
for these industries and is adopting the size standards of $21.5 
million for NAICS 541611 and of $17 million for NAICS 541990, as 
proposed.

Comments on Proposed Changes to NAICS 541810--Advertising Agencies

    SBA received one comment to its proposal to increase the size 
standard for NAICS 541810 (Advertising Agencies) from $16.5 million to 
$22.5 million. The comment, submitted on behalf of a coalition of 
advertising agencies, expressed support for the proposed increase to 
the size standard for this industry, but urged SBA to consider adopting 
a higher size standard between $28.5 million and $30 million based on 
increased demand for digital marketing services, which requires small 
firms to invest more heavily in information technology (IT) 
infrastructure and resources. The commenter explained that the increase 
in digital marketing services has transformed the industry and forced 
small advertising agencies to provide services outside of their primary 
area of expertise or resource bandwidths. The coalition maintained that 
the advertising industry is inequitably concentrated, with the top 4 
advertising agencies or their networks accounting for more than 50% of 
Federal Government revenue in 2019, which supports a higher size 
standard for NAICS 541810. It also noted that advertising contracts are 
requiring increasingly sophisticated IT infrastructure, Customer 
Relations Management (CRM)/marketing automation platforms, IT storage 
and hosting, and greater cybersecurity and compliance services, all of 
which add significant costs beyond the financial capabilities of many 
small businesses under the current size standard. The coalition of 
firms further recommended that SBA consider other data sources in order 
to obtain a fuller and more accurate understanding of the economic 
characteristics of the industry and recommended that SBA increase the 
size standard for NAICS 541810 to match the SBA proposed size standards 
for NAICS 541830 (Media Buying Agencies--$28.5 million), NAICS 541511 
(Custom Computer Programing Services--$30 million), and NAICS 541512 
(Computer Systems Design Services--$30 million) based on their 
relevance and similarities to Advertising Agencies. The commenter also 
contended that the 2012 Economic Census data, instead of the more 
recent and comprehensive industry data beyond the Economic Census, that 
SBA used in the proposed rule is outdated and does not accurately 
reflect the current structure of the advertising agencies industry. 
Finally, the coalition urged SBA to allow advertising agencies to 
exclude subcontractor costs from the calculation of receipts for the 
size standard. The coalition provided SBA with a copy of the executive 
summary of the Ad Age Datacenter Agency Report 2020 and data showing 
total advertising agency revenue by year and by firm size for the top 
250 advertising agencies in the U.S.
SBA's Response
    In response to the comment that the 2012 Economic Census data SBA 
used to develop the proposed size standard for NAICS 541810 
(Advertising Agencies) are outdated and may not reflect the current 
industry structure and that SBA should use alternative data beyond the 
Economic Census data, SBA reviewed the data provided by the commenter. 
Due to the limited sample size, SBA determined that the data provided 
by the commenter are not comprehensive enough for evaluating this 
industry's size standard using the ``SBA's Size Standards 
Methodology.'' Specifically, according to the Economic Census, there 
are more than 12,000 firms operating in the U.S. in NAICS 541810, as 
compared to about 400 firms in comment's Exhibit A and just 250 firms 
in its Exhibit C. Moreover, the Economic Census only includes the 
revenue data for the U.S. based companies; however, the data provided 
by the commenter appears to include the revenue data for the non-U.S. 
advertising companies as well. The data might have even included the 
companies for which advertising is not their primary activity. SBA 
surveyed other available industry data sources and determined that the 
special tabulation of the 2012 Economic Census was still the latest 
(when the November 2020 proposed rule was drafted) and most 
comprehensive data source available for evaluating all industries 
consistently and on the same terms. The Economic Census provides 
information across all industries under its scope, using uniform 
definitions and measures, which allow for consistent industry 
comparisons at the same moment in time. Because the firm size 
distribution does not change drastically from one Economic Census to 
the next, the data retains its usefulness even if it is not produced in 
a recent year. SBA recently received a preliminary special tabulation 
based on the 2017 Economic Census. SBA found that the industry 
structure for NAICS 541810 has not drastically changed in the 2017 
tabulation as compared to the 2012 tabulation. For example, SBA found 
that under the SBA's $22.5 million proposed size standard for NAICS 
541810, 98% of firms are classified as small based on the 2012 Economic 
Census tabulation, as compared to 97.3% of firms that would qualify as 
small under the proposed size standard based on the 2017 Economic 
Census data tabulation.
    Moreover, as explained in the methodology section of the November 
2020 proposed rule, SBA did not rely solely on 2012 Economic Census 
data to evaluate all industry factors. For example, SBA used the RMA 
data (http://www.rmahq.org/estatement-studies/) for fiscal years 2016-
18 to determine the sales (receipts) to total assets ratio for an 
industry which is then used to calculate the ``average assets'' factor 
(proxy for start-up costs and entry barriers) by applying the ratio to 
the average receipts of firms in an industry. 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 
lower than most other industries is likely to have lower startup costs; 
this will support either lowering or maintaining the size standard. 
Regarding NAICS 541810, specifically, SBA used the recent data to 
calculate an average asset size of $0.9 million which supported a size 
standard of $11 million.
    Similarly, SBA used FPDS-NG data from fiscal years 2016-2018 to 
evaluate the Federal contracting factor, which measures small business 
participation in the Federal market in terms of the share of total 
Federal contract dollars awarded to small businesses relative to the 
small business share of an industry's total receipts. In general, if 
the share of Federal contract dollars awarded to small businesses in an 
industry is significantly smaller than the small business share of 
total industry's receipts, all else remaining the same, a justification 
would exist for considering a size standard higher than the current 
size standard. In cases where small business share of the Federal 
market is already appreciably high relative to the small business share 
of the overall market, SBA generally assumes that the existing size 
standard is adequate with

[[Page 18678]]

respect to the Federal contracting factor. Regarding NAICS 541810, 
specifically, using the FPDS-NG data for fiscal years 2016-2018 (the 
latest available when the proposed rule was drafted), SBA calculated a 
Federal contracting factor of -20.8% which supported a size standard of 
$20 million.
    In response to the commenter's suggestion that SBA should allow 
advertising agencies to exclude subcontractor costs (usually referred 
to as ``pass-throughs''), SBA reviewed its current definition of 
receipts and its prior rulemakings where it has received similar 
comments on this issue. SBA found that this suggestion is not new, nor 
is it unique to NAICS 541810. SBA's definition of receipts states the 
following: ``Receipts means `total income' (or in the case of a sole 
proprietorship, `gross income') plus `cost of goods sold' as these 
terms are defined and reported on Internal Revenue Service (IRS) tax 
return forms . . . .'' 13 CFR 121.104. The definition of receipts 
provides for several exclusions, including amounts collected for 
another by an advertising agent. 13 CFR 121.104(a). In calculating the 
revenue of an advertising agent, SBA excludes funds received in trust 
for an unaffiliated third party (such as bookings or sales subject to 
commissions), but includes the commissions received as revenue (see 
Footnote 10 to the SBA's Table of Size Standards in 13 CFR 121.201). 
The exclusions do not apply to subcontracting, materials, or related 
costs. SBA recognizes that subcontracting and material costs can be 
more substantial for some businesses and industries than for others. 
The Economic Census data that SBA uses in its size standards analysis 
includes all sources of revenues received by companies, including the 
values of their subcontracts. If the agency excluded the value of 
``pass-throughs'' or subcontracting revenues from the calculation of 
receipts, SBA would have to adjust its methodology to establish a lower 
size standard to reflect the size of the industry without the 
subcontracting or ``pass-through'' costs.
    Generally, SBA includes all revenues in its calculation of 
receipts--first, because Economic Census data includes them, as stated 
above, and second, because SBA's existing definitions of receipts and 
employees provide a consistent approach to measuring business size for 
establishing eligibility for small business programs for all 
industries. If SBA were to exclude certain costs from revenue 
calculation for one or a few industries, the participants in other 
industries could raise the same issue. This would create a ``slippery 
slope'' leading toward widespread inconsistency in how businesses 
calculate their receipts to determine if they are small. The better 
solution would be to have higher size standards than otherwise 
supported by industry and Federal contracting factors for industries 
with high ``pass-through'' costs, so that the size standards reflect 
the realities of how such firms conduct their business. Again, SBA's 
current definition of receipts is consistent with how businesses report 
their revenues for the Economic Census. The current definition is also 
consistent with the Small Business Act, which provides that size 
standards are to be established based on `` * * * annual average gross 
receipts of the business concern . . . .'' (15 U.S.C. 
632(a)(2)(C)(ii)(II) [emphasis added]).
    SBA also disagrees with the comment that SBA should establish a 
higher size standard for NAICS 541810 to match the proposed size 
standards for other industries, namely NAICS 541830 (Media Buying 
Agencies--$28.5 million), NAICS 541511 (Custom Computer Programing 
Services--$30 million), and NAICS 541512 (Computer Systems Design 
Services--$30 million). Although these industries may have related or 
co-dependent business activities with Advertising Agencies, SBA's 
analysis of these industries, as detailed in Table 4 of the November 
2020 proposed rule, demonstrates that their industry structures and the 
economic characteristics of the firms providing services under these 
industries are markedly different, justifying a unique size standard 
for each industry.
    According to the NAICS manual, the Advertising Agencies industry 
comprises establishments primarily engaged in creating advertising 
campaigns and placing such advertising in periodicals, newspapers, 
radio and television, or other media. These establishments are 
organized to provide a full range of services (i.e., through in-house 
capabilities or subcontracting), including advice, creative services, 
account management, production of advertising material, media planning, 
and buying (i.e., placing advertising). NAICS 541511 and 541512, on the 
other hand, comprise of establishments primarily focused on planning 
and designing software and computer systems, and NAICS 541830 comprises 
establishments primarily engaged in purchasing advertising time or 
space from media outlets and reselling it to advertising agencies or 
individual companies directly. Among the three industries identified by 
the commenter as a basis for recommending a higher size standard of 
$28.5 million or $30 million for NAICS 541810, because of being in the 
same NAICS Industry Group 5418 (Advertising, Public Relations, and 
Related Services), NAICS 541830 is the closest to NAICS 541810. Yet, 
there are significant differences between the two industries, as shown 
in Table 5, Comparison of Primary Factors Between NAICS 541810 and 
NAICS 541830.

                  Table 5--Comparison of Primary Factors Between NAICS 541810 and NAICS 541830
----------------------------------------------------------------------------------------------------------------
                                                     541810 Adverting agencies     541830 Media buying agencies
          Primary factor/size standard           ---------------------------------------------------------------
                                                      Factor         Size std.        Factor         Size std.
----------------------------------------------------------------------------------------------------------------
Simple average firm size ($million).............            $2.9           $16.0            $8.4           $38.5
Weighted average firm size ($million)...........           896.3            37.0           283.3            17.0
Average assets size ($million)..................             0.9            11.0             2.6            20.5
Four-firm ratio (%).............................           30.1%            25.5           35.7%            30.0
Gini coefficient................................           0.801            29.0           0.838            35.5
Federal contracting factor (%)..................          -20.8%            20.0  ..............  ..............
Calculated size standard ($million).............  ..............            22.5  ..............            28.5
Proposed size standard ($million)...............  ..............            22.5  ..............            28.5
Current size standard ($million)................  ..............            16.5  ..............            16.5
----------------------------------------------------------------------------------------------------------------


[[Page 18679]]

    As can be seen from Table 5, there are significant differences with 
respect to factor values and supported size standards between NAICS 
541810 and NAICS 541830. For example, with a value of -20.8% the 
Federal contracting factor is significant for NAICS 541810 supporting a 
size standard of $20 million, but it is not significant for NAICS 
541830. With respect to industry factors, only the weighted average 
firm size supports a higher size standard for NAICS 541810. All other 
industry factors support higher size standards for NAICS 541830, 
producing a higher $28.5 million calculated size standard for the 
industry, as compared to a $22.5 million size standard for NAICS 
541810. Thus, SBA believes that the differences in the primary business 
activity of the firms participating in each industry justifies 
maintaining a separate size standard for each of the aforementioned 
NAICS industries.
    Therefore, for the reasons presented above, SBA accepts the 
analytical results and, in this final rule, and adopts the $22.5 
million size standard for NAICS 541810 (Advertising Agencies), as 
proposed. Based on the 2012 Economic Census tabulation, 98% of firms 
would qualify as small, thereby providing a robust pool of qualified 
small businesses for Federal set-aside opportunities.

Comments on Proposed Changes to NAICS 541930--Translation and 
Interpretation Services

    SBA received a total of 24 comments concerning its proposal to 
increase the size standard for NAICS 541930 (Translation and 
Interpretation Services) from $8 million to $20 million in average 
annual receipts. Of the 24 comments received, 17 comments expressed 
support for the SBA's proposed increase, while seven comments opposed 
the increase. These comments and SBA's responses are discussed below.
Comments Supporting the Proposed $20 Million Size Standard
    Fourteen of the seventeen comments supporting SBA's proposal were 
nearly identical and cited rapid industry growth and increased 
competitiveness of small firms as the basis for their support for the 
SBA's proposed $20 million size standard. These commenters, which 
comprised of individuals, companies, and a university, expressed that 
the SBA's proposed increase would match the rapid growth in the 
language industry, and would allow more companies to grow and stay 
competitive as small businesses. Other commenters in support of the 
proposed increase expressed similar reasons for their support, citing 
increased demand for translation services in recent years and the 
increased capital requirements for translation services providers. For 
example, a firm providing sign language interpreting services expressed 
that the $20 million size standard was appropriate because larger 
investments are needed by firms in the industry to meet the growing 
demands of technology, security provisions and other compliance 
standards required by customers.
    One commenter noted that Federal contract values for language 
services continue to grow, and that the proposed increase to the size 
standard will increase set-aside opportunities for small businesses and 
ensure that the Federal Government has an adequate pool of small 
businesses to meet its growing needs for language and interpretation 
services. The same commenter also stated that increasing the size 
standard would also promote small business subcontracting by allowing 
small business subcontractors to remain small and continue to operate 
under prime contracts. One commenter mentioned that Government 
contracts have become larger and larger and a single contract can 
easily reach the size threshold.
SBA's Response
    SBA agrees with the commenters that the higher $20 million size 
standard reflects current market conditions in the language and 
interpretation services industry, will allow small businesses to grow 
remain small for an extended period, expand Federal opportunities for 
small businesses, and provide the Government with an expanded pool of 
qualified small businesses to meet their growing translation and 
interpretation services needs.
Comments Opposing the Proposed $20 Million Size Standard
    Commenters opposed to SBA's proposed increase to the size standard 
for NAICS 541930 included six language interpretation firms and one 
individual, of which six proposed to leave the size standard unchanged 
at $8 million and one suggested lowering it to $4 million. One 
commenter maintained that considering the unprecedented impact of the 
COVID-19 pandemic on small businesses, SBA should not be increasing the 
size standard in the current environment. All commenters opposed the 
proposed increase to the size standard over concerns that it would 
unfairly disadvantage the population of currently small firms, 
especially the smallest of small firms. One commenter expressed that 
SBA's proposed size standard would lead to buyouts and mergers 
initiated by larger firms that would ultimately put small companies out 
of business. Another argued that a company with a $20 million revenue 
does not need Government assistance. Three commenters suggested that 
SBA create multiple size classifications within the industry to 
identify and target resources towards firms that are ``truly'' small 
and ensure that very large businesses are not able to access resources 
intended for small businesses. One commenter recommended that SBA 
define the size classifications in this industry as follows: Below $8 
million as ``small''; from $8 million to $20 million as ``medium''; 
from $20 million to $100 million as ``large''; and above $100 million 
as ``extra-large.'' Another commenter recommended that SBA adopt an 
employee-based size standard for this industry to provide a more even 
playing field but did not provide additional data or information to 
support this recommendation.
SBA's Response
    Although SBA recognizes the challenges that both very small and 
mid-sized businesses face in the Federal market, SBA believes that 
suggested tiered size standards would add significant complexity to 
size standards, which many believe are already too complex. For the 
tiered size standards approach to work as envisioned by its proponents, 
small business contracting goals would need to be established at each 
tier to ensure that small businesses at different tiers have fair 
access to Federal small business contracts. Moreover, the Small 
Business Act gives SBA's Administrator the authority to determine what 
constitutes a small business concern for Federal Government programs, 
but the Act does not provide for definitions of other than small 
businesses. As such, SBA does not agree with commenters that it should 
create multiple size classifications within the industry. SBA also 
disagrees with the comment that number of employees is a better measure 
of business size than the level of receipts for this industry. The 
Small Business Act requires that the size of businesses in services 
industries be based on average annual gross receipts. Additionally, for 
industries where subcontracting is widespread, such as many 
professional services industries, including Translation and 
Interpretation Services, SBA is concerned that an employee-based size 
standard may

[[Page 18680]]

encourage businesses to excessively outsource Federal work to other 
businesses to remain within the size standard. Under the receipts-based 
size standard, businesses are not allowed to deduct value of work 
outsourced, and therefore cannot reduce their size by outsourcing a 
higher proportion of work.
    Regarding commenters' concern that raising the size standard will 
disadvantage the smallest of small firms in this industry, SBA notes 
that increasing size standards does not necessarily put firms that are 
small under the current size standard at a competitive disadvantage. In 
fact, increasing size standards can have an opposite impact. With 
higher size standards and a larger pool of businesses qualifying as 
small, Federal agencies are likely to utilize more small business set-
asides, thereby increasing opportunities for all small businesses. As 
stated above, most of the comments received to the proposed rule 
regarding the size standard for NAICS 541930 supported the proposed $20 
million size standard, contending, in part, that this increase will 
enable firms below that level to develop and become competitively 
viable. SBA agrees with these commenters that the proposed increase to 
size standard for NAICS 541930 will benefit all small businesses and 
better reflect the economic characteristics of the industry.
    For the above reasons, SBA is adopting the $20 million size 
standard for NAICS 541930, as proposed.

Comments on Proposed Changes to All Sectors

    SBA received six comments to the proposed rule that did not discuss 
SBA's proposed changes to size standards for any particular industry or 
sector, but instead, focused on broader issues applicable to all 
sectors. Of the six comments received, four comments were opposed to 
SBA's proposed changes and two comments were in favor. Three commenters 
opposed to SBA's proposed changes expressed that the general levels of 
size standards are already too high. One opposing commenter suggested 
that a possible small business definition of 50 employees or less and 
receipts of $1 million or less may be more appropriate. Another 
commenter expressed similar concerns and suggested that SBA create a 
micro small business designation. Another commenter opposed SBA's 
proposed size standards based on the level of fraudulent activity that 
occurred during the execution of the Paycheck Protection Program (PPP). 
This commenter argued that SBA's resources should be used to curtail 
fraud in the PPP prior to developing a rule adjusting size standards. 
Comments in favor of SBA's proposed rule expressed that SBA's proposed 
size standards better reflected the current industry composition for 
the industries covered by this rulemaking. One commenter also supported 
proposed changes based on SBA's policy decision to not lower size 
standards at this time considering the impact from the COVID-19 induced 
economic recession.
SBA's Response
    SBA does not agree with commenters that the general level of size 
standards is too high and that the maximum thresholds should be set at 
$1 million or 50 employees. SBA's size standards methodology has 
established minimum and maximum limits for receipts-based and employee-
based size standards (84 FR 14587 (April 11, 2019)). Prior to 
finalizing the 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. With respect to receipts-based size standards, SBA has 
established $6 million and $41.5 million, respectively, as the minimum 
and maximum size standard levels (except for most agricultural 
industries in NAICS Subsectors 111 and 112 for which $1 million and $5 
million are the minimum and maximum levels, respectively). Under this 
rule, SBA is not considering comments pertaining to its size standards 
methodology, which was already finalized through notice and comment 
process prior to this review. SBA also disagrees with the comment that 
SBA's resources should be wholly devoted to preventing abuse of PPP 
loans at the expense of completing the comprehensive review of size 
standards. As discussed earlier in this rule, in accordance with the 
Jobs Act, SBA is mandated to review all size standards every five years 
and make necessary adjustments to reflect current industry and market 
conditions. SBA does not have the authority to suspend this 
requirement, nor does it believe that it would be in the public's best 
interest to suspend or terminate this review. SBA agrees with 
commenters that the size standards contained in the proposed rule 
better reflect the composition and economic characteristics of the 
underlying industries. SBA also agrees that its policy to not lower 
size standards at this time based on the analytical results is 
appropriate and reduces the level of uncertainty for small businesses 
as the wider economy continues to improve.

Conclusion

    Based on the results of the analysis of industry and Federal 
contracting factors in Table 4 of the November 2020 proposed rule, 
evaluation of public comments to the proposed rule discussed above, and 
consideration of the impact of the COVID-19 pandemic on small 
businesses and Government response, in this final rule, SBA is adopting 
its proposal to increase 46 and retain 48 receipts-based size standards 
in Sectors 54, 55, and 56 without change.

Summary of Adopted Revisions to Size Standards

    Based on the evaluation of public comments it received on the 
proposed rule and on the results of analyses of its industry and 
Federal contracting factors using the latest available data and 
considerations of the impact of the COVID-19 pandemic on small 
businesses and Government response, SBA is adopting the size standards 
as proposed in the November 2020 proposed rule. Thus, SBA is increasing 
the size standards for 46 industries in Sectors 54, 55, and 56, 
including 27 industries in NAICS Sector 54 (Professional, Scientific 
and Technical Services), 2 industries in Sector 55 (Management of 
Companies and Enterprises), and 17 industries in Sector 56 
(Administrative and Support and Waste Management and Remediation 
Services). A summary of SBA's size standards revisions in this rule can 
be found below in Table 6, Summary of Size Standards Revisions in NAICS 
Sectors 54, 55, and 56.

[[Page 18681]]



                  Table 6--Summary of Size Standards Revisions in NAICS Sectors 54, 55, and 56
----------------------------------------------------------------------------------------------------------------
                                                                   Current size     Calculated     Adopted size
              NAICS code                   NAICS U.S. industry      standard ($    size standard    standard ($
                                                  title              million)       ($ million)      million)
----------------------------------------------------------------------------------------------------------------
541110................................  Offices of Lawyers......            12.0            13.5            13.5
541191................................  Title Abstract and                  12.0            17.0            17.0
                                         Settlement Offices.
541199................................  All Other Legal Services            12.0            18.0            18.0
541211................................  Offices of Certified                22.0            23.5            23.5
                                         Public Accountants.
541213................................  Tax Preparation Services            22.0            12.0            22.0
541214................................  Payroll Services........            22.0            34.5            34.5
541219................................  Other Accounting                    22.0            17.5            22.0
                                         Services.
541310................................  Architectural Services..             8.0            11.0            11.0
541320................................  Landscape Architectural              8.0             6.5             8.0
                                         Services.
541330................................  Engineering Services....            16.5            22.5            22.5
541330 (Exception 1)..................  Military and Aerospace             41.50           39.00           41.50
                                         Equipment and Military
                                         Weapons.
541330 (Exception 2)..................  Contracts and                      41.50           39.00           41.50
                                         Subcontracts for
                                         Engineering Services
                                         Awarded Under the
                                         National Energy Policy
                                         Act of 1992.
541330 (Exception 3)..................  Marine Engineering and             41.50           41.50           41.50
                                         Naval Architecture.
541340................................  Drafting Services.......             8.0             7.0             8.0
541350................................  Building Inspection                  8.0            10.0            10.0
                                         Services.
541360................................  Geophysical Surveying               16.5            25.0            25.0
                                         and Mapping Services.
541370................................  Surveying and Mapping               16.5            14.0            16.5
                                         (except Geophysical)
                                         Services.
541380................................  Testing Laboratories....            16.5            16.5            16.5
541410................................  Interior Design Services             8.0             6.5             8.0
541420................................  Industrial Design                    8.0            15.0            15.0
                                         Services.
541430................................  Graphic Design Services.             8.0             7.5             8.0
541490................................  Other Specialized Design             8.0            12.0            12.0
                                         Services.
541511................................  Custom Computer                     30.0            20.5            30.0
                                         Programming Services.
541512................................  Computer Systems Design             30.0            27.0            30.0
                                         Services.
541513................................  Computer Facilities                 30.0            32.5            32.5
                                         Management Services.
541519................................  Other Computer Related              30.0            21.0            30.0
                                         Services.
541611................................  Administrative                      16.5            21.5            21.5
                                         Management and General
                                         Management Consulting
                                         Services.
541612................................  Human Resources                     16.5            25.5            25.5
                                         Consulting Services.
541613................................  Marketing Consulting                16.5            14.5            16.5
                                         Services.
541614................................  Process, Physical                   16.5            17.5            17.5
                                         Distribution, and
                                         Logistics Consulting
                                         Services.
541618................................  Other Management                    16.5            13.0            16.5
                                         Consulting Services.
541620................................  Environmental Consulting            16.5            13.5            16.5
                                         Services.
541690................................  Other Scientific and                16.5            15.5            16.5
                                         Technical Consulting
                                         Services.
541720................................  Research and Development            22.0            24.5            24.5
                                         in the Social Sciences
                                         and Humanities.
541810................................  Advertising Agencies....            16.5            22.5            22.5
541820................................  Public Relations                    16.5            15.0            16.5
                                         Agencies.
541830................................  Media Buying Agencies...            16.5            28.5            28.5
541840................................  Media Representatives...            16.5            18.5            18.5
541850................................  Outdoor Advertising.....            16.5            30.5            30.5
541860................................  Direct Mail Advertising.            16.5            19.5            19.5
541870................................  Advertising Material                16.5            25.0            25.0
                                         Distribution Services.
541890................................  Other Services Related              16.5            16.0            16.5
                                         to Advertising.
541910................................  Marketing Research and              16.5            20.0            20.0
                                         Public Opinion Polling.
541921................................  Photography Studios,                 8.0            14.0            14.0
                                         Portrait.
541922................................  Commercial Photography..             8.0             8.0             8.0
541930................................  Translation and                      8.0            20.0            20.0
                                         Interpretation Services.
541940................................  Veterinary Services.....             8.0             9.0             9.0
541990................................  All Other Professional,             16.5            17.0            17.0
                                         Scientific and
                                         Technical Services.
551111................................  Offices of Bank Holding             22.0            34.0            34.0
                                         Companies.
551112................................  Offices of Other Holding            22.0            40.0            40.0
                                         Companies.
561110................................  Office Administrative                8.0            11.0            11.0
                                         Services.
561210................................  Facilities Support                  41.5            32.5            41.5
                                         Services.
561311................................  Employment Placement                30.0            21.0            30.0
                                         Agencies.
561312................................  Executive Search                    30.0            12.0            30.0
                                         Services.
561320................................  Temporary Help Services.            30.0            26.5            30.0
561330................................  Professional Employer               30.0            36.5            36.5
                                         Organizations.
561410................................  Document Preparation                16.5            16.5            16.5
                                         Services.
561421................................  Telephone Answering                 16.5            14.5            16.5
                                         Services.
561422................................  Telemarketing Bureaus               16.5            22.5            22.5
                                         and Other Contact
                                         Centers.
561431................................  Private Mail Centers....            16.5             8.5            16.5
561439................................  Other Business Service              16.5            23.5            23.5
                                         Centers (including Copy
                                         Shops).
561440................................  Collection Agencies.....            16.5            17.0            17.0
561450................................  Credit Bureaus..........            16.5            36.0            36.0
561491................................  Repossession Services...            16.5             9.0            16.5
561492................................  Court Reporting and                 16.5            14.0            16.5
                                         Stenotype Services.
561499................................  All Other Business                  16.5            19.0            19.0
                                         Support Services.

[[Page 18682]]

 
561510................................  Travel Agencies.........            22.0            19.0            22.0
561520................................  Tour Operators..........            22.0            13.5            22.0
561591................................  Convention and Visitors             22.0            13.5            22.0
                                         Bureaus.
561599................................  All Other Travel                    22.0            28.5            28.5
                                         Arrangement and
                                         Reservation Services.
561611................................  Investigation Services..            22.0            21.5            22.0
561612................................  Security Guards and                 22.0            25.5            25.5
                                         Patrol Services.
561613................................  Armored Car Services....            22.0            38.0            38.0
561621................................  Security Systems                    22.0            20.5            22.0
                                         Services (except
                                         Locksmiths).
561622................................  Locksmiths..............            22.0             7.0            22.0
561710................................  Exterminating and Pest              12.0            15.5            15.5
                                         Control Services.
561720................................  Janitorial Services.....            19.5            15.0            19.5
561730................................  Landscaping Services....             8.0             8.5             8.5
561740................................  Carpet and Upholstery                6.0             7.5             7.5
                                         Cleaning Services.
561790................................  Other Services to                    8.0             8.0             8.0
                                         Buildings and Dwellings.
561910................................  Packaging and Labeling              12.0            17.0            17.0
                                         Services.
561920................................  Convention and Trade                12.0            17.5            17.5
                                         Show Organizers.
561990................................  All Other Support                   12.0            14.5            14.5
                                         Services.
562111................................  Solid Waste Collection..            41.5            34.0            41.5
562112................................  Hazardous Waste                     41.5            31.0            41.5
                                         Collection.
562119................................  Other Waste Collection..            41.5            25.0            41.5
562211................................  Hazardous Waste                     41.5            39.0            41.5
                                         Treatment and Disposal.
562212................................  Solid Waste Landfill....            41.5            39.0            41.5
562213................................  Solid Waste Combustors              41.5            41.0            41.5
                                         and Incinerators.
562219................................  Other Nonhazardous Waste            41.5            24.5            41.5
                                         Treatment and Disposal.
562910................................  Remediation Services....            22.0            18.5            22.0
562920................................  Materials Recovery                  22.0            21.5            22.0
                                         Facilities.
562991................................  Septic Tank and Related              8.0             8.0             8.0
                                         Services.
562998................................  All Other Miscellaneous              8.0            14.5            14.5
                                         Waste Management
                                         Services.
----------------------------------------------------------------------------------------------------------------

    Table 7, Summary of Revised Size Standards by Sector, summarizes 
the adopted changes to size standards by NAICS sector.

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

Evaluation of Dominance in Field of Operation

    SBA determined that for the industries evaluated under the under 
this final rule, no individual firm at or below the revised size 
standards would be large enough to dominate its field of operation. At 
the size standard levels adopted in this final rule, the small business 
share of total industry receipts among those industries would be, on 
average, 0.4%, varying from 0.005% to 4.8%. These market shares 
effectively preclude a firm at or below the revised size standards from 
exerting control on any of the industries.

Alternatives Considered

    In response to the unprecedented economic impacts of the COVID-19 
pandemic on small businesses, SBA is adopting increases to size 
standards where the data suggests increases are warranted, and 
retaining all current size standards where the data suggested lowering 
or retaining is appropriate.
    Nonetheless, SBA considered two other alternatives. Alternative 
Option One was to adopt changes to size standards exactly as suggested 
by the analytical results. In other words, Alternative Option One would 
entail increasing size standards for 46 industries, decreasing them for 
42 industries, and retaining them at their current levels for 6 
industries. Alternative Option Two was to retain all current size 
standards at their current levels.
    SBA did not adopt Alternative Option One because it would cause a 
substantial number of currently small businesses to lose their small 
business status and hence to lose their access to Federal small 
business assistance, especially small business set-aside contracts and 
SBA's financial assistance in some cases. Lowering size standards in 
the current environment would run counter to various measures the 
Federal Government has implemented to help U.S. small businesses and 
the overall economy recover from the ongoing COVID-19 pandemic. 
Considering the impacts of the Great Recession and

[[Page 18683]]

Government actions that followed to support small businesses and the 
overall economy, SBA also adopted a similar policy of not decreasing 
size standards during the first five-year review of size standards, 
even though the data suggested decreases.
    Under Alternative Option Two, given the current COVID-19 pandemic, 
SBA considered retaining all size standards at their current levels 
even though the analysis of relevant data suggested changing them. 
Under this option, as the current situation develops, SBA will be able 
to assess new data available on economic indicators, federal 
procurement, and SBA loans before adopting changes to size standards. 
However, SBA is not adopting Alternative Option Two either because the 
results discussed in the Regulatory Impact Analysis section, below, 
shows that retaining all size standards at their current levels would 
cause otherwise qualified small businesses to forgo various small 
business benefits becoming available to them under the option of 
increasing 46 and retaining 48 size standards adopted in this final 
rule. Such benefits would include access to Federal contracts set aside 
for small businesses and capital through SBA's loan and SBIC programs, 
and exemptions from paperwork and other compliance requirements.

Compliance With Executive Orders 12866, the Congressional Review Act (5 
U.S.C. 801-808), the Regulatory Flexibility Act (5 U.S.C. 601-612), 
Executive Orders 13563, 12988, and 13132, and the Paperwork Reduction 
Act (44 U.S.C. Ch. 35)

Executive Order 12866

    The Office of Management and Budget (OMB) has determined that this 
final rule is a significant regulatory action for purposes of Executive 
Order 12866. Accordingly, in the next section SBA provides a Regulatory 
Impact Analysis of this final rule, including (1) A statement of the 
need for the regulatory action, (2) An examination of alternative 
approaches, and (3) An evaluation of the benefits and costs--both 
quantitative and qualitative--of this regulatory action and the 
alternatives considered.

Regulatory Impact Analysis

1. What is the need for this regulatory action?
    SBA's mission is to aid and assist small businesses through a 
variety of financial, procurement, business development and counseling, 
and disaster assistance programs. To determine the actual intended 
beneficiaries of these programs, SBA establishes numerical size 
standards by industry to identify businesses that are deemed small.
    Under the Small Business Act (Act) (15 U.S.C. 632(a)), SBA's 
Administrator is responsible for establishing small business size 
definitions (or ``size standards'') and ensuring that such definitions 
vary from industry to industry to reflect differences among various 
industries. The Jobs Act requires SBA to review every five years all 
size standards and make necessary adjustments to reflect current 
industry and Federal market conditions. This final rule is part of the 
second five-year review of size standards in accordance with the Jobs 
Act. The first five-year review of size standards was completed in 
early 2016. Such periodic reviews of size standards provide SBA with an 
opportunity to incorporate ongoing changes to industry structure and 
Federal market environment into size standards and to evaluate the 
impacts of prior revisions to size standards on small businesses. This 
also provides SBA with an opportunity to seek and incorporate public 
input to the size standards review and analysis. SBA believes that the 
size standards revisions adopted for industries being reviewed in this 
final rule will make size standards more reflective of the current 
economic characteristics of businesses in those industries and the 
latest trends in Federal marketplace.
    The revisions to the existing size standards for 46 industries in 
NAICS Sectors 54, 55, and 56 are consistent with SBA's statutory 
mandate to help small businesses grow and create jobs and to review and 
adjust size standards every five years. This regulatory action promotes 
the Administration's goals and objectives as well as meets the SBA's 
statutory responsibility. One of SBA's goals in support of promoting 
the Administration's objectives is to help small businesses succeed 
through fair and equitable access to capital and credit, Federal 
Government contracts and purchases, and management and technical 
assistance. Reviewing and modifying size standards, when appropriate, 
ensures that intended beneficiaries can access Federal small business 
programs that are designed to assist them to become competitive and 
create jobs.
2. What are the potential benefits and costs of this regulatory action?
    OMB directs agencies to establish an appropriate baseline to 
evaluate any benefits, costs, or transfer impacts of regulatory actions 
and alternative approaches considered. The baseline should represent 
the agency's best assessment of what the world would look like absent 
the regulatory action. For a new regulatory action promulgating 
modifications to an existing regulation (such as modifying the existing 
size standards), a baseline assuming no change to the regulation (i.e., 
making no changes to current size standards) generally provides an 
appropriate benchmark for evaluating benefits, costs, or transfer 
impacts of regulatory changes and their alternatives.
Changes to Size Standards
    Based on the results from the analysis of the latest industry and 
Federal contracting data, as well as consideration of the impact of 
size standards changes on small businesses and significant adverse 
impacts of the COVID-19 emergency on small businesses and the overall 
economic activity, of the total of 94 industries in Sectors 54, 55, and 
56 that have receipts-based size standards, SBA is adopting increases 
to size standards for 46 industries and maintaining current size 
standards for the remaining 48 industries (including exceptions).
The Baseline
    For purposes of this regulatory action, the baseline represents 
maintaining the ``status quo,'' i.e., making no changes to the current 
size standards. Using the number of small businesses and levels of 
benefits (such as set-aside contracts, SBA's loans, disaster 
assistance, etc.) they receive under the current size standards as a 
baseline, one can examine the potential benefits, costs, and transfer 
impacts of changes to size standards on small businesses and on the 
overall economy.
    Based on the 2012 Economic Census (the latest available), of a 
total of about 1,096,800 businesses in industries in Sectors 54, 55, 
and 56, 97.9% are considered small under the current size standards. 
That percentage varies from 65.3% in Sector 55 to 98.4% in Sector 54. 
Based on the data from FPDS-NG for fiscal years 2018-2020, about 36,685 
unique firms in those industries received at least one Federal contract 
during that period, of which 80.1% were small under the current size 
standards. A total of $154 billion in average annual contract dollars 
were awarded to businesses in those industries during the period of 
evaluation, and 33.9% of the dollars awarded went to small businesses. 
For these sectors, providing contract dollars to small business through 
set-asides is quite important. From the total small business contract 
dollars awarded during the period considered, 71.9%

[[Page 18684]]

were awarded through various small business set-aside programs and 
28.1% were awarded through non-set set-aside contracts. Based on the 
SBA's internal data on its loan programs for fiscal years 2018-2020, 
small businesses in those industries received, on an annual basis, a 
total of 7,955 7(a) and 504 loans in that period, totaling about $2.9 
billion, of which 83.4% was issued through the 7(a) program and 16.6% 
was issued through the 504/CDC program. During fiscal years 2018-2020, 
small businesses in those industries also received 527 loans through 
the SBA's Economic Injury Disaster Loan (EIDL) program, totaling about 
$23.8 million on an annual basis.\2\ Table 8, Baseline for All 
Industries, below, provides these baseline results by sector.
---------------------------------------------------------------------------

    \2\ The analysis of the disaster loan data excludes physical 
disaster loans that are available to anyone regardless of size, 
disaster loans issued to nonprofit entities, and EIDLs issued under 
the COVID-19 relief program. Effective January 1, 2022, SBA stopped 
accepting applications for new COVID EIDL loans or advances. Thus, 
the disaster loan analysis here pertains to the regular EIDL loans 
only.
    SBA estimates impacts of size standards changes on EIDL loans by 
calculating the ratio of businesses getting EIDL loans to total 
small businesses (based on the Economic Census data) and multiplying 
it by the number of impacted small firms. Due to data limitations, 
for FY 2019-20, some loans with both physical and EIDL loan 
components could not be broken into the physical and EIDL loan 
amounts. In such cases, SBA applied the ratio of EIDL amount to 
total (physical loan + EIDL) amount using FY 2016-18 data to the FY 
2019-20 data to obtain the amount attributable to the EIDL loans.

                                      Table 8--Baseline for All Industries
----------------------------------------------------------------------------------------------------------------
                                                     Sector 54       Sector 55       Sector 56         Total
----------------------------------------------------------------------------------------------------------------
Baseline All Industries (current size standards)              48               2              44              94
Total firms (Economic Census)...................         760,701           7,544         328,522       1,096,767
Total small firms under current size standards           748,170           4,926         320,672       1,073,769
 (Economic Census)..............................
Small firms as % of total firms.................           98.3%           65.3%           97.6%           97.9%
Total contract dollars ($ million) (FPDS-NG             $113,299            $0.1         $40,300        $153,600
 FY2018-2020)...................................
Total small business contract dollars under              $41,227            $0.0         $10,810         $52,037
 current standards ($ million) (FPDS-NG FY2018-
 2020)..........................................
Small business dollars as % of total dollars               36.4%            1.1%           26.8%           33.9%
 (FPDS-NG FY2016-2020)..........................
Total no. of unique firms getting contracts               25,173               3          13,887          36,685
 (FPDS-NG FY2018-2020)..........................
Total no. of unique small firms getting small             19,476               1          11,479          29,374
 business contracts (FPDS-NG FY2018-2020).......
Small business firms as % of total firms........           77.4%           33.3%           82.7%           80.1%
No. of 7(a) and 504/CDC loans (FY 2018-2020)....           5,120              43           2,792           7,955
Amount of 7(a) and 504 loans ($ million) (FY              $1,979             $30            $871          $2,881
 2018-2020).....................................
No. of EIDL loans (FY 2018-2020) *..............             364               1             162             527
Amount of EIDL loans ($ million) (FY 2018-2020)            $16.5           $0.02            $7.3           $23.8
 *..............................................
----------------------------------------------------------------------------------------------------------------
* Excludes COVID-19 related EIDL loans due to their temporary nature. Effective January 1, 2022, SBA stopped
  accepting applications for new COVID EIDL loans or advances.

Increases to Size Standards
    As stated above, of 94 receipts-based size standards in Sectors 54, 
55, and 56 reviewed, based on the results from analyses of latest 
industry and Federal market data as well as impacts of size standards 
changes on small businesses and the considerations of the impact of the 
COVID-19 pandemic and public comments to the proposed rule, in this 
final rule, SBA is increasing the size standards for 46 industries and 
retaining the size standards for 48 industries. Below are descriptions 
of the benefits, costs, and transfer impacts of these increases to size 
standards.
    The results of regulatory impact analyses SBA provided in the 
October 2020 proposed rule were based on the FPDS-NG and SBA loan data 
for fiscal years 2016-2018. In this final rule, SBA is updating the 
impact analysis results by using the FPDS-NG and SBA loan data for 
fiscal years 2018-2020. Accordingly, there can be some differences 
between the proposed rule and this final rule with respect to impacts 
of size standards changes on Federal contracts and SBA loans.
Benefits of Increasing Size Standards
    The most significant benefit to businesses from increases to size 
standards is gaining eligibility for Federal small business assistance 
programs or retaining eligibility for a longer period. These include 
SBA's business loan programs, Economic Injury Disaster Loan (EIDL) 
program, and Federal procurement programs intended for small 
businesses. Federal procurement programs provide targeted, set-aside 
opportunities for small businesses under SBA's various business 
development and contracting programs. These include the 8(a)/BD 
(Business Development) Program, the Small Disadvantaged Businesses 
(SDB) Program, the Historically Underutilized Business Zones (HUBZone) 
Program, the Women-Owned Small Businesses (WOSB) Program, the 
Economically Disadvantaged Women-Owned Small Businesses (EDWOSB) 
Program, and the Service-Disabled Veteran-Owned Small Businesses 
(SDVOSB) Program.
    Besides set-aside contracting and financial assistance discussed 
above, small businesses also benefit through reduced fees, less 
paperwork, and fewer compliance requirements that are available to 
small businesses through the Federal Government programs. However, SBA 
has no data to estimate the number of small businesses receiving such 
benefits.
    As shown in Table 9, Benefits of Increasing Size Standards, based 
on the 2012 Economic Census (latest available), SBA estimates that in 
46 industries in NAICS Sectors 54, 55, and 56 for which it has decided 
to increase size standards, about 2,600 firms, not small under the 
current size standards, will become small under the revised size 
standards and therefore become eligible for above programs. That 
represents about 0.4% of all firms classified as small under the 
current size standards in industries for which SBA is increasing size 
standards. The revised size standards would result in an increase to 
the small business share of total receipts in those industries from 
34.7% to 37%.
    With more businesses qualifying as small under the higher size 
standards, Federal agencies will have a larger pool of small businesses 
from which to draw for their small business procurement programs. 
Growing small businesses that are close to exceeding the current

[[Page 18685]]

size standards will be able to retain their small business status for a 
longer period under the higher size standards, thereby enabling them to 
continue to benefit from the small business programs.
    Based on the FPDS-NG data for fiscal years 2018-2020, SBA estimates 
that about 463 firms that are active in Federal contracting in those 
industries would gain small business status under the revised size 
standards. Based on the same data, SBA estimates that those newly 
qualified small businesses under the increases to 46 size standards 
could receive Federal small business contracts totaling about $915 
million annually. That represents a 4.1% increase to small business 
dollars from the baseline.

                                  Table 9--Impacts of Increasing Size Standards
----------------------------------------------------------------------------------------------------------------
                                                     Sector 54       Sector 55       Sector 56         Total
----------------------------------------------------------------------------------------------------------------
No. of industries with increases to size                      27               2              17              46
 standards......................................
Total current small businesses in industries             462,890           4,926         176,504         644,321
 with Proposed increases to size standards
 (Economic Census 2012).........................
Additional firms qualifying as small under                 1,345             527             710           2,582
 standards (2012 Economic Census)...............
% of additional firms qualifying as small                   0.3%           10.7%            0.4%            0.4%
 relative to current small businesses in
 industries with increases to size standards....
No. of current unique small firms getting small           11,920               1           3,717          15,092
 business contracts in industries with increases
 to size standards (FPDS-NG FY2018-2020) \1\....
Additional small business firms getting small                400  ..............             122             463
 business status (FPDS-NG FY2018-2020) \1\......
% increase to small businesses relative to                  3.4%            0.0%            3.3%            3.1%
 current unique small firms getting small
 business contracts in industries with increases
 to size standards (FPDS-NG FY2018-2020)........
Total small business contract dollars under              $19,108            $0.0          $3,044         $22,152
 current standards in industries with increases
 to size standards ($ million) (FPDS-NG FY2018-
 2020)..........................................
Estimated small business dollars available to               $799            $0.0            $116            $915
 newly-qualified small firms (Using avg dollars
 obligated to SBs) ($ million) FPDS-NG FY 2018-
 2020) \2\......................................
% increase to small business dollars relative to            4.2%            0.0%            3.8%            4.1%
 total small business contract dollars under
 current standards in industries with increases
 to size standards..............................
Total no. of 7(a) and 504 loans to small                   2,982              43           1,446           4,471
 business in industries with increases to size
 standards (FY 2018-2020).......................
Total amount of 7(a) and 504 loans to small               $1,302             $30            $436          $1,769
 businesses in industries with increases to size
 standards ($ million) (FY 2018-2020)...........
Estimated no. of 7(a) and 504 loans to newly-                  9               5               6              20
 qualified small firms..........................
Estimated 7(a) and 504 loan amount to newly                 $3.9            $3.5            $1.8            $9.3
 qualified small firms ($ million)..............
% increase to 7(a) and 504 loan amount relative             0.3%           11.6%            0.4%            0.5%
 to the total amount of 7(a) and 504 loans in
 industries with increases to size standards....
Total no. of EIDL loans to small businesses in               222               1              87             310
 industries with increases to size standards (FY
 2018-2020) \3\.................................
Total amount of EIDL loans to small businesses             $10.8           $0.02            $3.8           $14.6
 in industries with increases to size standards
 ($ million) (FY 2018-2020) \3\.................
Estimated no. of EIDL loans to newly-qualified                 1               1               1               3
 small firms \3\................................
Estimated EIDL loan amount to newly-qualified              $0.05           $0.02           $0.04            0.11
 small firms ($ million) \3\....................
% increase to EIDL loan amount relative to the              0.5%          100.0%            1.1%            0.8%
 total amount of EIDL loans in industries with
 increases to size standards \3\................
----------------------------------------------------------------------------------------------------------------
\1\ Total impact represents total unique number of firms impacted to avoid double counting as some firms are
  participating in more than one industry.
\2\ Additional dollars are calculated multiplying average small business dollars obligated per DUNS times change
  in number of firms. Numbers of firms are calculated using the SBA current size standard, not the contracting
  officer's size designation.
\3\ Excludes COVID-19 related EIDL loans due to their temporary nature. Effective January 1, 2022, SBA stopped
  accepting applications for new COVID EIDL loans or advances.

    The added competition from more businesses qualifying as small can 
result in lower prices to the Federal Government for procurements set-
aside or reserved for small businesses, but SBA cannot quantify this 
impact. Costs could be higher when full and open contracts are awarded 
to HUBZone businesses that receive price evaluation preferences. 
However, with agencies likely setting aside more contracts for small 
businesses in response to the availability of a larger pool of small 
businesses under the higher size standards, HUBZone firms might end up 
getting more set-aside contracts and fewer full and open contracts, 
thereby resulting in some cost savings to agencies. SBA cannot estimate 
such costs savings as it is impossible to determine the number and 
value of unrestricted contracts to be otherwise awarded to HUBZone 
firms will be awarded as set-asides. However, such cost savings are 
likely to be relatively small as only a small fraction of full and open 
contracts are awarded to HUBZone businesses.
    Under SBA's 7(a) and 504 loan programs, based on the data for 
fiscal years 2018-2020, SBA estimates up to about 20 SBA 7(a) and 504 
loans totaling about $9.3 million could be made to these newly-
qualified small businesses in those industries under the revised size 
standards. That represents a 0.5% increase to the loan amount compared 
to the baseline (see Table 9).
    Newly-qualified small businesses will also benefit from the SBA's 
EIDL program. Because the benefits provided through this program are 
contingent on

[[Page 18686]]

the occurrence and severity of a disaster in the future, SBA cannot 
make a meaningful estimate of this impact. However, based on the 
historical trends of the EIDL program data, SBA estimates that, on an 
annual basis, the newly defined small businesses under the increases of 
46 size standards could receive three EIDL loans, totaling about $0.11 
million. Additionally, the newly-defined small businesses would also 
benefit through reduced fees, less paperwork, and fewer compliance 
requirements that are available to small businesses through the Federal 
Government, but SBA has no data to quantify this impact (see Table 9)
Costs of Increases to Size Standards
    Besides having to register in sam.gov to be able to participate in 
Federal contracting and update the SAM profile annually, small 
businesses incur no direct costs to gain or retain their small business 
status because of increases to size standards. All businesses willing 
to do business with the Federal Government must register in SAM and 
update their SAM profiles annually, regardless of their size status. 
SBA believes that a vast majority of businesses that are willing to 
participate in Federal contracting are already registered in SAM and 
update their SAM profiles annually. This final rule does not establish 
the new size standards for the very first time; rather it modifies the 
existing size standards in accordance with a statutory requirement, the 
latest data, and other relevant factors.
    To the extent that the newly qualified small businesses could 
become active in Federal procurement, the increases to size standards 
may entail some additional administrative costs to the Federal 
Government as a result of more businesses qualifying as small for 
Federal small business programs. For example, there will be more firms 
seeking SBA's loans, more firms eligible for enrollment in the Dynamic 
Small Business Search (DSBS) database or in certify.sba.gov, more firms 
seeking certification as 8(a)/BD or HUBZone firms or qualifying for 
small business, SDB, WOSB, EDWOSB, and SDVOSB status, and more firms 
applying for SBA's 8(a)/BD and mentor-prot[eacute]g[eacute] programs. 
With an expanded pool of small businesses, it is likely that Federal 
agencies would set-aside more contracts for small businesses under the 
adopted increases to size standards. One may surmise that this might 
result in a higher number of small business size protests and 
additional processing costs to agencies. However, the SBA's historical 
data on the number size protests processed shows that the number of 
size protests decreased following the increases to receipts-based size 
standards as part of the first five-year review of size standards. 
Specifically, on an annual basis, the number of size protests fell from 
about 600 during fiscal years 2011-2013 (review of most receipts-based 
size standards was completed by the end of FY 2013), as compared to 
about 500 during fiscal years 2018-2020 when increases to size 
standards were in effect. That represents a 17% decline.
    Among those newly-defined small businesses seeking SBA's loans, 
there could be some additional costs associated with verification of 
their small business status. However, small business lenders have an 
option of using the tangible net worth and net income-based alternative 
size standard instead of using the industry-based size standards to 
establish eligibility for SBA's loans. For these reasons, SBA believes 
that these added administrative costs will be minor because necessary 
mechanisms are already in place to handle these added requirements.
    Additionally, some Federal contracts may possibly have higher 
costs. With a greater number of businesses defined as small due to the 
increases to size standards, Federal agencies may choose to set-aside 
more contracts for competition among small businesses only instead of 
using a full and open competition. The movement of contracts from 
unrestricted competition to small business set-aside contracts might 
result in competition among fewer total bidders, although there will be 
more small businesses eligible to submit offers under the higher size 
standards. However, the additional costs associated with fewer bidders 
are expected to be minor because, by law, procurements may be set-aside 
for small businesses under the 8(a)/BD, SDB, HUBZone, WOSB, EDWOSB, or 
SDVOSB programs only if awards are expected to be made at fair and 
reasonable prices.
    Costs may also be higher when full and open contracts are awarded 
to HUBZone businesses that receive price evaluation preferences. 
However, with agencies likely setting aside more contracts for small 
businesses in response to the availability of a larger pool of small 
businesses under the higher size standards, HUBZone firms might 
actually end up getting fewer full and open contracts, thereby 
resulting in some cost savings to agencies. However, such cost savings 
are likely to be minimal as only a small fraction of unrestricted 
contracts are awarded to HUBZone businesses.
Transfer Impacts of Increasing Size Standards
    The increases to 46 size standards that are adopted in this final 
rule may result in some redistribution of Federal contracts between the 
newly-qualified small businesses and large businesses and between the 
newly-qualified small businesses and small businesses under the current 
standards. However, it would have no impact on the overall economic 
activity because total Federal contract dollars available for 
businesses to compete for will not change with changes to size 
standards. Although SBA cannot quantify with certainty the actual 
outcome of the gains and losses from the redistribution contracts among 
different groups of businesses, it can identify several probable 
impacts in qualitative terms. With the availability of a larger pool of 
small businesses under the higher size standards, some unrestricted 
Federal contracts that would otherwise be awarded to large businesses 
may be set-aside for small businesses. As a result, large businesses 
may lose some Federal contracting opportunities. Similarly, some small 
businesses under the current size standards may obtain fewer set-aside 
contracts due to the increased competition from larger businesses 
qualifying as small under the higher size standards. This impact may be 
offset by a greater number of procurements being set-aside for all 
small businesses. With larger businesses qualifying as small under the 
higher size standards, smaller small businesses could face some 
disadvantage in competing for set-aside contracts against their larger 
counterparts. However, SBA cannot quantify these impacts.
3. What alternatives have been considered?
    Under OMB Circular A-4, SBA is required to consider regulatory 
alternatives to the changes in the final rule. In this section, SBA 
describes and analyzes two such alternatives.. Alternative Option One 
to the final rule, a more stringent alternative, would be to adopt size 
standards based solely on the analytical results. In other words, the 
size standards of 46 industries for which the analytical results 
suggest raising size standards would be raised. However, the size 
standards of 42 industries for which the analytical results, as 
presented in Table 4 of the November 2020 proposed rule, suggest 
lowering them would be lowered. For the six remaining industries, size 
standards would be maintained at their current levels. Alternative 
Option Two would be to retain all size standards for all

[[Page 18687]]

industries, given the uncertainty generated by the ongoing COVID-19 
pandemic. Below, SBA discusses and presents the net impacts of each 
option.
Alternative Option One: Consider Adopting All Calculated Size Standards
    As discussed in the Alternatives Considered section of this final 
rule, Alternative Option One would cause a substantial number of 
currently small businesses to lose their small business status and 
hence to lose their access to Federal small business assistance, 
especially small business set-aside contracts and SBA's financial 
assistance in some cases. These consequences could be mitigated. For 
example, in response to the 2008 Financial Crisis and economic 
conditions that followed, SBA adopted a general policy in the first 
five-year comprehensive size standards review to not lower any size 
standard (except to exclude one or more dominant firms) even when the 
analytical results suggested the size standard should be lowered. 
Currently, because of the economic challenges presented by the COVID-19 
pandemic and the measures taken to protect public health, SBA has 
decided to adopt the same general policy of not lowering size standards 
in the ongoing second five-year comprehensive size standards review as 
well.
    The primary benefit of adopting Alternative Option One would 
include: (1) SBA's procurement, management, technical and financial 
assistance resources would be targeted to the most appropriate 
beneficiaries of such programs according to the analytical results; (2) 
Adopting size standards based on the analytical results would also 
promote consistency and predictability in SBA's implementation of its 
authority to set or adjust size standards; and (3) Firms who would 
remain small would face less competition from larger small firms for 
the remaining set aside opportunities. Specifically, SBA sought public 
comment on the impact of adopting the size standards based on the 
analytical results.
    As explained in the ``Size Standards Methodology'' white paper, in 
addition to adopting all results of the primary analysis, SBA evaluates 
other relevant factors as needed such as the impact of the reductions 
in or increases to size standards on the distribution of contracts 
awarded to small businesses, and may adopt different results with the 
intention of mitigating potential negative impacts.
    We discussed already the benefits, costs, and transfer impacts of 
increasing 46 size standards. Below we discuss the benefits, costs, and 
transfer impacts of decreasing 42 size standards.
Benefits of Decreasing Size Standards Under Alternative Option One
    The most significant benefit to businesses from decreases to size 
standards when SBA's analysis suggests such decreases is to ensure that 
size standards are more reflective of latest industry structure and 
Federal market trends and that Federal small business assistance is 
more effectively targeted to its intended beneficiaries. These include 
SBA's business loan programs, EIDL program, and Federal procurement 
programs intended for small businesses. Federal procurement programs 
provide targeted, set-aside opportunities for small businesses under 
SBA's business development programs, such as small business, 8(a)/BD, 
HUBZone, WOSB, EDWOSB, and SDVOSB programs. The adoption of calculated 
size standards diminishes the risk of awarding contracts to firms that 
are not small anymore.
    Decreasing size standards may reduce the administrative costs of 
the Federal Government, because the risk of awarding set-aside 
contracts to other than small businesses may diminish when the size 
standards reflect better the structure of the market. This may also 
diminish the risks of providing SBA's loans to firms that do not need 
them the most. This may provide a better chance for smaller small firms 
to grow and benefit from the opportunities available on the Federal 
marketplace, and strengthen the small business industrial base for the 
Federal Government.
Costs of Decreasing Size Standards Under Alternative Option One
    Table 10, Impacts of Decreasing Size Standards Under Alternative 
Option One, below, shows the various impacts of lowering size standards 
in 42 industries based solely on the analytical results. Based on the 
2012 Economic Census, about 1,050 (0.3%) firms would lose their small 
business status under this option. Similarly, based on the FPDS-NG data 
for fiscal years 2018-2020, about 400 (2.5%) small businesses 
participating in Federal contracting would lose their small status and 
become ineligible to compete for set-aside contracts.
    With fewer businesses qualifying as small under the decreases to 
size standards, Federal agencies will have a smaller pool of small 
businesses from which to draw for their small business procurement 
programs. For example, during fiscal years 2018-2020, agencies awarded, 
on an annual basis, about $29.6 billion in small business contracts in 
those 42 industries for which SBA considered decreasing size standards.

                   Table 10--Impacts of Decreasing Size Standards Under Alternative Option One
----------------------------------------------------------------------------------------------------------------
                                                     Sector 54       Sector 55       Sector 56         Total
----------------------------------------------------------------------------------------------------------------
No. of industries for which SBA considered                    18               0              24              42
 decreasing size standards (2012 Economic
 Census)........................................
Total current small businesses in industries for         276,751               0         125,106         401,857
 which SBA considered decreasing size standards
 (EC 2012)......................................
Estimated no. of firms losing small status for               676               0             375           1,051
 which SBA considered decreasing size standards
 (2012 Economic Census).........................
% of Firms losing small status relative to                  0.2%              0%            0.3%            0.3%
 current small businesses in industries for
 which SBA considered decreasing size standards
 (2012 Economic Census).........................
No. of current unique small firms getting small            9,334  ..............           7,526          16,242
 business contracts in industries for which SBA
 considered decreasing size standards (FPDS-NG
 FY 2018-2020) \1\..............................
Estimated number of small business firms that                306               0             138             407
 would have lost small business status in the
 decreases that SBA considered (FPDS-NG, FY2018-
 2020) \1\......................................
% decrease to small business firms relative to              3.3%            0.0%            1.8%            2.5%
 current unique small firms getting small
 business contracts in industries for which SBA
 considered decreasing size standards (FPDS-NG
 FY 2018-2020)..................................

[[Page 18688]]

 
Total small business contract dollars under              $21,980              $0          $7,631         $29,611
 current size standards in industries for which
 SBA considered decreasing size standards ($
 million) (FPDS-NG FY 2018-2020)................
Estimated small business dollars not available            $1,056              $0            $216          $1,272
 to firms losing small business status (Using
 avg dollars obligated to SBs) ($ million) \ 2\
 (FPDS-NG FY 2018-2020) \2\.....................
% decrease to small business dollars relative to            4.8%            0.0%            2.8%            4.3%
 total small business contract dollars under
 current size standards in industries for which
 SBA considered decreasing size standards (FPDS-
 NG FY 2018-2020)...............................
Total no. of 7(a) and 504 loans to small                   2,053  ..............           1,119           3,172
 businesses in industries for which SBA
 considered decreasing size standards (FY 2018-
 2020)..........................................
Total amount of 7(a) and 504 loans to small                 $639              $0            $357            $996
 businesses in industries for which SBA
 considered decreasing size standards ($
 million) (FY 2018-2020)........................
Estimated no. of 7(a) and 504 loans not                        6               0               4              10
 available to firms that would have lost small
 business status................................
Estimated 7(a) and 504 loan amount not available            $1.9            $0.0            $1.3            $3.1
 to firms that would have lost small status ($
 million).......................................
% decrease to 7(a) and 504 loan amount relative             0.3%            0.0%            0.4%            0.3%
 to the total amount of 7(a) and 504 loans in
 industries for which SBA considered decreasing
 size standards.................................
Total no. of EIDL loans to small businesses in               134               0              65             199
 industries for which SBA considered decreasing
 size standards (FY 2018-2020)..................
Total amount of EIDL loans to small businesses              $5.2            $0.0            $3.2            $8.5
 in industries for which SBA considered
 decreasing size standards ($ million) (FY 2018-
 2020)..........................................
Estimated no. of EIDL loans not available to                   1               0               1               2
 firms that would have lost small business
 status.........................................
Estimated EIDL loan amount not available to                $0.04           $0.00           $0.05           $0.09
 firms that would have lost small business
 status ($ million).............................
% decrease to EIDL loan amount relative to the              0.7%            0.0%            1.5%            1.0%
 baseline.......................................
----------------------------------------------------------------------------------------------------------------
\1\ Total impact represents total unique number of firms impacted to avoid double counting as some firms are
  participating in more than one industry.
\2\ Additional dollars are calculated multiplying average small business dollars obligated per DUNS times change
  in number of firms. Numbers of firms are calculated using the SBA current size standard, not the contracting
  officer's size designation.
\3\ Excludes COVID-19 related EIDL loans due to their temporary nature. Effective January 1, 2022, SBA stopped
  accepting applications for new COVID EIDL loans or advances.

    As shown in Table 10, lowering size standards in 42 industries 
would reduce Federal contract dollars awarded to small businesses by 
$1.3 billion or about 4.3% relative to the baseline level. Because of 
the importance of these sectors for the Federal procurement, SBA may 
adopt mitigating measures to reduce the negative impact under this 
option. SBA could adopt one or more of the following three actions: (1) 
Accept decreases in size standards as suggested by the analytical 
results, (2) Decrease size standards by a smaller amount than the 
calculated threshold, and (3) Retain the size standards at their 
current levels.
    Nevertheless, because Federal agencies are still required to meet 
the statutory small business contracting goal of 23%, actual impacts on 
the overall set-aside activity are likely to be smaller as agencies are 
likely to award more set-aside contracts to small businesses that 
continue to remain small under the reduced size standards.
    With fewer businesses qualifying as small, the decreased 
competition can also result in higher prices to the Government for 
procurements set-aside or reserved for small businesses, but SBA cannot 
quantify this impact. Lowering size standards may cause current small 
business contract or option holders to lose their small business 
status, thereby making those dollars unavailable to count toward the 
agencies' small business procurement goals. Additionally, impacted 
small businesses will be unable to compete for upcoming options as 
small businesses.
    As shown in Table 10, decreases to size standards would have a very 
minor impact on small businesses applying for SBA's 7(a) and 504 loans 
because a vast majority of such loans are issued to businesses that are 
far below the reduced size standards. For example, based on the loan 
data for fiscal years 2018-2020, SBA estimates that about ten of SBA's 
7(a) and 504 loans with total amounts of $3.1 million could not be made 
to those small businesses that would lose eligibility under the reduced 
size standards (before mitigation). That represents about 0.3% decrease 
of the loan amounts compared to the baseline. However, the actual 
impact could be much less as businesses losing small business 
eligibility under the decreases to industry-based size standards could 
still qualify for SBA's loans under the tangible net worth and net 
income-based alternative size standard.
    Businesses losing small business status would also be impacted by 
way of access to loans through the SBA's EIDL loan program. However, 
SBA expects such impact to be minimal as only a small number of 
businesses in those industries received such loans during fiscal years 
2018-2020. For example, based on the disaster loan data for fiscal 
years 2018-2020, SBA estimates that, under Alternative Option One, two 
EIDL loans with total amounts of $0.09 million could not be made to 
those small businesses that would lose eligibility under the reduced 
size standards (before mitigation). That represents about 1.0% decrease 
of the loan amounts compared to the baseline. Because this program is 
contingent on the occurrence and severity of a disaster in the future, 
SBA cannot make a more meaningful estimate of this impact (see Table 
10).
    Small businesses becoming other than small if size standards were 
decreased might lose benefits through reduced fees, less paperwork, and 
fewer

[[Page 18689]]

compliance requirements that are available to small businesses through 
the Federal Government programs, but SBA has no data to quantify this 
impact. However, if agencies determine that SBA's size standards do not 
adequately serve such purposes, they can establish a different size 
standard with an approval from SBA if they are required to use SBA's 
size standards for their programs.
Transfer Impacts of Decreasing Size Standards Under Alternative Option 
One
    If the size standards were decreased under Alternative Option One, 
it may result in a redistribution of Federal contracts between small 
businesses losing their small business status and large businesses and 
between small businesses losing their small business status and small 
businesses remaining small under the reduced size standards. However, 
as under the increases to size standards, it would have no impact on 
the overall economic activity because the total Federal contract 
dollars available for businesses to compete for will stay the same. 
Although SBA cannot estimate with certainty the actual outcome of the 
gains and losses among different groups of businesses from contract 
redistribution resulting from decreases to size standards, it can 
identify several probable impacts.
    With a smaller pool of small businesses under the decreases to size 
standards, some set-aside Federal contracts to be otherwise awarded to 
small businesses may be competed on an unrestricted basis. As a result, 
large businesses may have more Federal contracting opportunities. 
However, because agencies are still required by law to award 23% of 
Federal dollars to small businesses, SBA expects the movement of set-
aside contracts to unrestricted competition to be limited. For the same 
reason, small businesses remaining small under the reduced size 
standards are likely to obtain more set-aside contracts due to the 
reduced competition from fewer businesses qualifying as small under the 
decreases to size standards. With some larger small businesses losing 
small business status under the decreases to size standards, smaller 
small businesses would likely become more competitive in obtaining set-
aside contracts. However, SBA cannot quantify these impacts.
Net Impact of Alternative Option One
    To estimate the net impacts of Alternative Option One, SBA followed 
the same methodology used to evaluate the impacts of the increases to 
size standards (see Table 9). However, under Alternative Option One, 
SBA used the calculated size standards instead of the revised ones to 
determine the impacts of changes to current thresholds. The impact of 
the increases of size standards were already shown in Table 9. Table 10 
and Table 11, Net Impacts of Size Standards Changes under Alternative 
Option One, present the impact of the decreases of size standards and 
the net impact of adopting the calculated results under Alternative 
Option One, respectively.
    Based on the 2012 Economic Census, SBA estimates that in 88 
industries in NAICS Sectors 54, 55, and 56 for which the analytical 
results suggested to change size standards, about 1,530 firms (see 
Table 10), would become small under Alternative Option One. That 
represents about 0.1% of all firms classified as small under the 
current size standards. That is about 1,050 fewer firms qualifying as 
small under Alternative Option One, which represents a more than 40% 
reduction from about 2,585 firms that would qualify as small (see Table 
8) under the proposal being adopted in this final rule (i.e., 
increasing 46 and retaining 48 size standards).

                  Table 11--Net Impacts of Size Standards Changes Under Alternative Option One
----------------------------------------------------------------------------------------------------------------
                                                     Sector 54       Sector 55       Sector 56         Total
----------------------------------------------------------------------------------------------------------------
No. of industries with changes to size standards              45               2              41              88
Total no. of small business under the current            739,641           4,926         301,609       1,046,177
 size standards (2012 Economic Census)..........
Additional firms qualifying as small under                   670             527             334           1,531
 Alternative Option One (2012 Economic Census)..
% of additional firms qualifying as small                   0.1%           10.7%            0.1%            0.1%
 relative to total current small businesses.....
No. of current unique small firms getting small           18,820               1          10,612          27,922
 business contracts (FPDS-NG FY 2018-2020) \1\..
Additional small firms getting small business                 16               0             -58             -75
 status (FPDS-NG FY 2018-2020) \1\..............
% increase to small firms relative to current               0.1%            0.0%           -0.5%           -0.3%
 unique small firms getting small business
 contracts (FPDS-NG FY 2018-2020)...............
Total small business small business contract             $41,089              $0         $10,675         $51,764
 dollars under current size standards ($
 million) (FPDS-NG FY 2018-2020)................
Estimated small business dollars available to              -$256              $0           -$100           -$357
 newly-qualified small firms ($ million) FPDS-NG
 FY 2018-2020) \2\..............................
% increase to dollars relative to total small              -0.6%            0.0%           -0.9%           -0.7%
 business contract dollars under current size
 standards......................................
Total no. of 7(a) and 504 loans to small                   5,120              43           2,792           7,955
 businesses (FY 2018-2020)......................
Total amount of 7(a) and 504 loans to small               $1,979             $30            $871          $2,881
 businesses (FY 2018-2020)......................
Estimated no. of additional 7(a) and 504 loans                 3               5               2              10
 to newly-qualified small firms.................
Estimated additional 7(a) and 504 loan amount to            $2.1            $3.5            $0.5            $6.1
 newly-qualified small firms ($ million)........
% increase to 7(a) and 504 loan amount relative             0.1%           11.6%            0.1%            0.2%
 to the total amount of 7(a) and 504 loans to
 small businesses...............................
Total no. of EIDL loans to small businesses (FY              364               1             162             527
 2018-2020) \3\.................................
Total amount of EIDL loans to small businesses             $16.5           $0.02            $7.3           $23.8
 (FY 2018-2020) \3\.............................
Estimated no. of additional EIDL r loans to                    0               1               0               1
 newly-qualified small firms \3\................
Estimated additional EIDL r loan amount to newly-          $0.01           $0.02           $0.01           $0.02
 qualified small firms ($ million) \3\..........

[[Page 18690]]

 
% increase to EIDL loan amount relative to the              0.1%          100.0%            0.2%            0.2%
 total amount of EIDL loans to small businesses
 \3\............................................
----------------------------------------------------------------------------------------------------------------
\1\ Total impact represents total unique number of firms impacted to avoid double counting as some firms are
  participating in more than one industry.
\2\ Additional dollars are calculated multiplying average small business dollars obligated per DUNS times change
  in number of firms. Numbers of firms are calculated using the SBA current size standard, not the contracting
  officer's size designation.
\3\ Excludes COVID-19 related EIDL loans due to their temporary nature. Effective January 1, 2022, SBA stopped
  accepting applications for new COVID EIDL loans or advances.

    Based on the FPDS-NG data for fiscal years 2018-2020, SBA estimates 
that about 75 active firms in Federal contracting in those industries 
would lose small business status under Alternative Option One, most of 
them from Sector 56. This represents a decrease of about 0.3% of the 
total number of small businesses participating in Federal contracting 
under the current size standards. Based on the same data, SBA estimates 
that about $357.0 million of Federal procurement dollars would not be 
available to firms losing their small status. This represents a 
decrease of 0.7% from the baseline. A large amount of the losses are 
accounted for by Sector 54 (see Table 11).
    Based on the SBA's loan data for fiscal years 2018-2020, the total 
number of 7(a) and 504 loans may increase by about ten loans, and the 
loan amounts by about $6.1 million. This represents a 0.2% increase of 
the loan amounts relative to the baseline.
    Firms' participation under the SBA's EIDL loan program will be 
affected as well. Because the benefit provided through this program is 
contingent on the occurrence and severity of a disaster in the future, 
SBA cannot make a meaningful estimate of this impact. However, based on 
the historical trends of the EIDL loan data, SBA estimates that the 
total number of disaster loans may increase by about one loan, and the 
loan amount by about $.02 million. This represents a 0.2% increase of 
the loan amounts relative to the group baseline.
Alternative Option Two: Retaining All Current Size Standards
    Under this option, given the current COVID-19 pandemic, as 
discussed elsewhere, SBA considered retaining the current levels of all 
size standards even though the analytical results suggested changing 
them. Under this option, as the current situation develops, SBA will be 
able to assess new data available on economic indicators, Federal 
procurement, and SBA loans as well. When compared to the baseline, 
there is a net impact of zero (i.e., zero benefit and zero cost) for 
retaining all size standards. However, this option would cause 
otherwise qualified small businesses to forgo various small business 
benefits (e.g., access to set-aside contracts and capital) that become 
available to them under the option of increasing 46 and retaining 48 
size standards adopted in this final rule. Moreover, retaining all size 
standards under Alternative Option Two would also be contrary to the 
SBA's statutory mandate to review and adjust, every five years, all 
size standards to reflect current industry and Federal market 
conditions. Retaining all size standards without required periodic 
adjustments would increasingly exclude otherwise eligible small 
businesses from small business benefits.

Congressional Review Act

    Subtitle E of the Small Business Regulatory Enforcement Fairness 
Act of 1996 (codified at 5 U.S.C. 801-808), also known as the 
Congressional Review Act or CRA, generally provides that before a rule 
may take effect, the agency promulgating the rule must submit a rule 
report, which includes a copy of the rule, to each House of the 
Congress and to the Comptroller General of the United States. SBA will 
submit a report containing this rule and other required information to 
the U.S. Senate, the U.S. House of Representatives, and the Comptroller 
General of the United States. A major rule under the CRA cannot take 
effect until 60 days after it is published in the Federal Register. 
OMB's Office of Information and Regulatory Affairs has determined that 
this rule is not a ``major rule'' as defined by 5 U.S.C. 804(2).

Final Regulatory Flexibility Analysis

    According to the Regulatory Flexibility Act (RFA), 5 U.S.C. 601-
612, when an agency issues a rulemaking, it must prepare a regulatory 
flexibility analysis to address the impact of the rule on small 
entities. This final rule, if adopted, may have a significant impact on 
a substantial number of small businesses in the industries covered by 
this final rule. As described above, this final rule may affect small 
businesses seeking Federal contracts, loans under SBA's 7(a), 504 and 
Disaster Loan programs, and assistance under other Federal small 
business programs.
    Immediately below, SBA sets forth a final regulatory flexibility 
analysis (FRFA) of this final rule addressing the following questions: 
(1) What is the need for and objective of the rule? (2) What is SBA's 
description and estimate of the number of small businesses to which the 
rule will apply? (3) What are the projected reporting, record keeping, 
and other compliance requirements of the rule? (4) What are the 
relevant Federal rules that may duplicate, overlap, or conflict with 
the rule? (5) What alternatives will allow SBA to accomplish its 
regulatory objectives while minimizing the impact on small businesses?
1. What is the need for and objective of the rule?
    Changes in industry structure, technological changes, productivity 
growth, mergers and acquisitions, and updated industry definitions have 
changed the structure of many the industries covered by this final 
rule. Such changes can be enough to support revisions to current size 
standards for some industries. Based on the analysis of the latest data 
available, SBA believes that the size standards adopted in this final 
rule more appropriately reflect the size of businesses that need 
Federal assistance. The 2010 Jobs Act also requires SBA to review all 
size standards and make necessary adjustments to reflect market 
conditions.
2. What is SBA's description and estimate of the number of small 
businesses to which the rule will apply?
    Based on data from the 2012 Economic Census, SBA estimates that 
there are about 1.05 million small firms covered by this rulemaking 
under industries with increases to size standards. As a result of this 
final rule, SBA estimates that an additional 1,530 businesses will be 
defined as small under the revised size standards.

[[Page 18691]]

3. What are the projected reporting, record keeping and other 
compliance requirements of the rule?
    The size standard changes in this final rule impose no additional 
reporting or record keeping requirements on small businesses. However, 
qualifying for Federal procurement and a number of other programs 
requires that businesses register in SAM and self-certify that they are 
small at least once annually (FAR 52.204-13). For existing contracts, 
small business contractors are required to update their SAM 
registration as necessary, to ensure that they reflect the Contractor's 
current status (FAR 52.219-28). Businesses are also required to verify 
that their SAM registration is current, accurate, and complete with the 
submission of an offer for every new contract (FAR 52.204-7 and 52.204-
8). Therefore, businesses opting to participate in those programs must 
comply with SAM requirements. Changes in small business size standards 
do not result in additional costs associated with SAM registration or 
certification. Changing size standards alters the access to SBA's 
programs that assist small businesses but does not impose a regulatory 
burden because they neither regulate nor control business behavior.
4. What are the relevant Federal rules that may duplicate, overlap, or 
conflict with the rule?
    Under section 3(a)(2)(C) of the Small Business Act, 15 U.S.C. 
632(a)(2)(c), Federal agencies must use SBA's size standards to define 
a small business, unless specifically authorized by statute to do 
otherwise. In 1995, SBA published in the Federal Register a list of 
statutory and regulatory size standards that identified the application 
of SBA's size standards as well as other size standards used by Federal 
agencies (60 FR 57988 (November 24, 1995)). SBA is not aware of any 
Federal rule that would duplicate or conflict with establishing size 
standards.
    However, the Small Business Act and SBA's regulations allow Federal 
agencies to develop different size standards if they believe that SBA's 
size standards are not appropriate for their programs, with the 
approval of SBA's Administrator (13 CFR 121.903). The Regulatory 
Flexibility Act authorizes an agency to establish an alternative small 
business definition, after consultation with the Office of Advocacy of 
the U.S. Small Business Administration (5 U.S.C. 601(3)).
5. What alternatives will allow SBA to accomplish its regulatory 
objectives while minimizing the impact on small entities?
    By law, SBA is required to develop numerical size standards for 
establishing eligibility for Federal small business assistance 
programs. Other than varying size standards by industry and changing 
the size measures, no practical alternative exists to the systems of 
numerical size standards.
    However, SBA considered two alternatives to increasing 46 and 
maintaining 48 size standards at their current levels. The first 
alternative SBA considered was adopting size standards based solely on 
the analytical results. In other words, the size standards of 46 
industries for which the analytical results suggest raising them would 
be raised. However, the size standards of 42 industries for which the 
analytical results suggest lowering size standards would be lowered. 
This would cause a significant number of small businesses to lose their 
small business status, particularly in sectors 54 and 56 (see Table 9). 
Under the second alternative, in view of the COVID-19 pandemic, SBA 
considered retaining all size standards at the current levels, even 
though the analytical results may suggest increasing 46 and decreasing 
42 size standards. Retaining all size standards at their current levels 
would be more onerous for small businesses than the option of 
increasing 46 and retaining the remaining 48 size standards. Postponing 
the adoption of the higher calculated size standards would be 
detrimental for otherwise small businesses within those industries in 
terms of access to various small business benefits, including access to 
set-aside contracts and capital through SBA contracting and financial 
programs, and exemptions from paperwork and other compliance 
requirements.

Executive Order 13563

    Executive Order 13563 emphasizes the importance of quantifying both 
costs and benefits, reducing costs, harmonizing rules, and promoting 
flexibility. A description of the need for this regulatory action and 
benefits and costs associated with this action, including possible 
distributional impacts that relate to Executive Order 13563, is 
included above in the Regulatory Impact Analysis under Executive Order 
12866. Additionally, Executive Order 13563, section 6, calls for 
retrospective analyses of existing rules.
    The review of size standards in the industries covered by this 
final rule is consistent with section 6 of Executive Order 13563 and 
the 2010 Jobs Act, which requires SBA to review all size standards and 
make necessary adjustments to reflect market conditions. Specifically, 
the 2010 Jobs Act requires SBA to review at least one-third of all size 
standards during every 18-month period from the date of its enactment 
(September 27, 2010) and to review all size standards not less 
frequently than once every 5 years, thereafter. SBA had already 
launched a comprehensive review of size standards in 2007. In 
accordance with the Jobs Act, SBA completed the comprehensive review of 
the small business size standard for each industry, except those for 
agricultural enterprises previously set by Congress, and made 
appropriate adjustments to size standards for several industries to 
reflect current Federal and industry market conditions. The first 
comprehensive review was completed in early 2016. Prior to 2007, the 
last time SBA conducted a comprehensive review of all size standards 
was during the late 1970s and early 1980s.
    SBA issued a white paper entitled ``Size Standards Methodology'' 
and published a notice in the April 11, 2019, edition of the Federal 
Register (84 FR 14587) to advise the public that the document is 
available for public review and comments. The ``Size Standards 
Methodology'' white paper explains how SBA establishes, reviews, and 
modifies its receipts-based and employee-based small business size 
standards. SBA considered all input, suggestions, recommendations, and 
relevant information obtained from industry groups, individual 
businesses, and Federal agencies in developing size standards for those 
industries covered by this final rule. SBA received a total of 93 
comments to the proposed rule from a wide range of entities including 
individuals, corporations, trade associations and an academic 
institution. In the Summary of Comments section of this final rule, SBA 
summarizes and provides responses to the comments received on the 
proposed rule.

Executive Order 12988

    This action meets applicable standards set forth in sections 3(a) 
and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize 
litigation, eliminate ambiguity, and reduce burden. The action does not 
have retroactive or preemptive effect.

Executive Order 13132

    For purposes of Executive Order 13132, SBA has determined that this 
final rule will not have substantial,

[[Page 18692]]

direct effects on the States, on the relationship between the Federal 
Government and the States, or on the distribution of power and 
responsibilities among the various levels of Government. Therefore, SBA 
has determined that this final rule has no federalism implications 
warranting preparation of a federalism assessment.

Paperwork Reduction Act

    For the purpose of the Paperwork Reduction Act, 44 U.S.C. Ch. 35, 
SBA has determined that this final rule will not impose any new 
reporting or record keeping requirements.

List of Subjects in 13 CFR Part 121

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

    For the reasons set forth in the preamble, SBA amends 13 CFR part 
121 as follows:

PART 121--SMALL BUSINESS SIZE REGULATIONS

0
1. The authority citation for part 121 continues to read as follows:

    Authority:  15 U.S.C. 632, 634(b)(6), 636(a)(36), 662, and 
694a(9); Pub. L. 116-136, Section 1114.


0
2. In Sec.  121.201, amend the table by revising the entries for 
``541110,'' ``541191,'' ``541199,'' ``541211,'' ``541214,'' ``541310,'' 
``541330,'' ``541330 (Exception 1),'' ``541330 (Exception 2),'' 
``541330 (Exception 3),'' ``541350,'' ``541360,'' ``541420,'' 
``541490,'' ``541513,'' ``541611,'' ``541612,'' ``541614,'' ``541720,'' 
``541810,'' ``541830,'' ``541840,'' ``541850,'' ``541860,'' ``541870,'' 
``541910,'' ``541921,'' ``541930,'' ``541940,'' ``541990,'' ``551111,'' 
551112,'' the Sector 56 heading, and the entries for ``561110,'' 
``561330,'' ``561422,'' ``561439,'' ``561440,'' ``561450,'' ``561499,'' 
``561599,'' ``561612,'' ``561613,'' ``561710,'' ``561730,'' ``561740,'' 
``561910,'' ``561920,'' ``561990,'' and ``562998'' to read as follows:


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

* * * * *

                                 Small Business Size Standards by NAICS Industry
----------------------------------------------------------------------------------------------------------------
                                                                               Size standards    Size standards
                 NAICS codes                     NAICS U.S. industry title     in millions of     in number of
                                                                                   dollars          employees
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------
                           Sector 54--Professional, Scientific and Technical Services
                         Subsector 541--Professional, Scientific and Technical Services
----------------------------------------------------------------------------------------------------------------
541110......................................  Offices of Lawyers............             $13.5  ................
541191......................................  Title Abstract and Settlement               17.0  ................
                                               Offices.
541199......................................  All Other Legal Services......              18.0  ................
541211......................................  Offices of Certified Public                 23.5  ................
                                               Accountants.
 
                                                  * * * * * * *
541214......................................  Payroll Services..............              34.5  ................
 
                                                  * * * * * * *
541310......................................  Architectural Services........              11.0  ................
 
                                                  * * * * * * *
541330......................................  Engineering Services..........              22.5  ................
541330 (Exception 1)........................  Military and Aerospace                     41.50  ................
                                               Equipment and Military
                                               Weapons.
541330 (Exception 2)........................  Contracts and Subcontracts for             41.50  ................
                                               Engineering Services Awarded
                                               Under the National Energy
                                               Policy Act of 1992.
541330 (Exception 3)........................  Marine Engineering and Naval               41.50  ................
                                               Architecture.
 
                                                  * * * * * * *
541350......................................  Building Inspection Services..              10.0  ................
541360......................................  Geophysical Surveying and                   25.0  ................
                                               Mapping Services.
 
                                                  * * * * * * *
541420......................................  Industrial Design Services....              15.0  ................
 
                                                  * * * * * * *
541490......................................  Other Specialized Design                    12.0  ................
                                               Services.
 
                                                  * * * * * * *
541513......................................  Computer Facilities Management              32.5  ................
                                               Services.
 
                                                  * * * * * * *
541611......................................  Administrative Management and               21.5  ................
                                               General Management Consulting
                                               Services.
541612......................................  Human Resources Consulting                  25.5  ................
                                               Services.
 
                                                  * * * * * * *
541614......................................  Process, Physical                           17.5  ................
                                               Distribution, and Logistics
                                               Consulting Services.
 
                                                  * * * * * * *
541720......................................  Research and Development in                 24.5  ................
                                               the Social Sciences and
                                               Humanities.

[[Page 18693]]

 
541810......................................  Advertising Agencies \10\.....         \10\ 22.5  ................
 
                                                  * * * * * * *
541830......................................  Media Buying Agencies.........              28.5  ................
541840......................................  Media Representatives.........              18.5  ................
541850......................................  Outdoor Advertising...........              30.5  ................
541860......................................  Direct Mail Advertising.......              19.5  ................
541870......................................  Advertising Material                        25.0  ................
                                               Distribution Services.
 
                                                  * * * * * * *
541910......................................  Marketing Research and Public               20.0  ................
                                               Opinion Polling.
541921......................................  Photography Studios, Portrait.              14.0  ................
 
                                                  * * * * * * *
541930......................................  Translation and Interpretation              20.0  ................
                                               Services.
541940......................................  Veterinary Services...........               9.0  ................
541990......................................  All Other Professional,                     17.0  ................
                                               Scientific and Technical
                                               Services.
----------------------------------------------------------------------------------------------------------------
                               Sector 55--Management of Companies and Enterprises
                             Subsector 551--Management of Companies and Enterprises
----------------------------------------------------------------------------------------------------------------
551111......................................  Offices of Bank Holding                     34.0  ................
                                               Companies.
551112......................................  Offices of Other Holding                    40.0  ................
                                               Companies.
----------------------------------------------------------------------------------------------------------------
               Sector 56--Administrative and Support and Waste Management and Remediation Services
                               Subsector 561--Administrative and Support Services
----------------------------------------------------------------------------------------------------------------
561110......................................  Office Administrative Services              11.0  ................
 
                                                  * * * * * * *
561330......................................  Professional Employer                       36.5  ................
                                               Organizations.
 
                                                  * * * * * * *
561422......................................  Telemarketing Bureaus and                   22.5  ................
                                               Other Contact Centers.
 
                                                  * * * * * * *
561439......................................  Other Business Service Centers              23.5  ................
                                               (including Copy Shops).
561440......................................  Collection Agencies...........              17.0  ................
561450......................................  Credit Bureaus................              36.0  ................
 
                                                  * * * * * * *
561499......................................  All Other Business Support                  19.0  ................
                                               Services.
 
                                                  * * * * * * *
561599......................................  All Other Travel Arrangement                28.5  ................
                                               and Reservation Services.
 
                                                  * * * * * * *
561612......................................  Security Guards and Patrol                  25.5  ................
                                               Services.
561613......................................  Armored Car Services..........              38.0  ................
 
                                                  * * * * * * *
561710......................................  Exterminating and Pest Control              15.5  ................
                                               Services.
 
                                                  * * * * * * *
561730......................................  Landscaping Services..........               8.5  ................
561740......................................  Carpet and Upholstery Cleaning               7.5  ................
                                               Services.
 
                                                  * * * * * * *
561910......................................  Packaging and Labeling                      17.0  ................
                                               Services.
561920......................................  Convention and Trade Show              \10\ 17.5  ................
                                               Organizers \10\.
561990......................................  All Other Support Services....              14.5  ................
----------------------------------------------------------------------------------------------------------------
                            Subsector 562--Waste Management and Remediation Services
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
562998......................................  All Other Miscellaneous Waste               14.5  ................
                                               Management Services.
 
                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------
Footnotes

[[Page 18694]]

 
 * * * * * * *
\10\ NAICS codes 488510 (excluding the exception), 531210, 541810, 561510, 561520 and 561920--As measured by
  total revenues, but excluding funds received in trust for an unaffiliated third party, such as bookings or
  sales subject to commissions. The commissions received are included as revenue.
 * * * * * * *



Isabella Casillas Guzman,
Administrator.
[FR Doc. 2022-06611 Filed 3-30-22; 8:45 am]
BILLING CODE 8026-03-P