[Federal Register Volume 90, Number 161 (Friday, August 22, 2025)]
[Proposed Rules]
[Pages 41168-41277]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-16142]
[[Page 41167]]
Vol. 90
Friday,
No. 161
August 22, 2025
Part II
Small Business Administration
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13 CFR Part 121
Small Business Size Standards: Monetary-Based Industry Size Standards;
Proposed Rule
Federal Register / Vol. 90 , No. 161 / Friday, August 22, 2025 /
Proposed Rules
[[Page 41168]]
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SMALL BUSINESS ADMINISTRATION
13 CFR Part 121
RIN 3245-AI12
Small Business Size Standards: Monetary-Based Industry Size
Standards
AGENCY: U.S. Small Business Administration.
ACTION: Proposed rule.
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SUMMARY: The U.S. Small Business Administration (SBA or the Agency)
proposes to increase its monetary based small business size definitions
(commonly referred to as ``size standards'') for 263 industries (259
receipts based and four assets based). SBA proposes to retain receipts
based size standards for 237 industries and 12 subindustries
(``exceptions'') and remove one exception. SBA's proposal relied on its
recently revised ``Size Standards Methodology'' (Revised Methodology).
SBA seeks comments on its proposed changes to size standards and data
sources it evaluated to develop the proposed size standards. SBA also
invites comments on its proposed policy of not lowering any size
standards, except for excluding dominant firms from qualifying as
small. In accordance with 5 U.S.C. 553(b)(4), a summary of this rule
may be found at www.regulations.gov.
DATES: SBA must receive comments on this proposed rule on or before
October 21, 2025.
ADDRESSES: Identify your comments by RIN 3245-AI12 or Docket No. SBA-
2025-0102 and submit them by one of the following methods: (1) Federal
eRulemaking Portal: www.regulations.gov. Follow the instructions for
submitting comments; or (2) Mail/Hand Delivery/Courier: Khem R. Sharma,
Ph.D., Chief, Size Standards Division, 409 Third Street SW, Mail Code
6530, Washington, DC 20416.
SBA will post all comments on this proposed rule on
www.regulations.gov. If you wish to submit confidential business
information (CBI) as defined in the User Notice at www.regulations.gov,
you must submit such information to U.S. Small Business Administration,
Khem R. Sharma, Ph.D., Chief, Size Standards Division, 409 Third Street
SW, Mail Code 6530, Washington, DC 20416, or send an email to
[email protected]. Highlight the information that you consider to
be CBI and explain why you believe SBA should hold this information as
confidential. SBA will review your information and determine whether it
will make the information public.
FOR FURTHER INFORMATION CONTACT: Jorge Laboy-Bruno, Ph.D., Economist,
Size Standards Division, (202) 205-6618 or [email protected].
SUPPLEMENTARY INFORMATION: To determine eligibility for Federal small
business assistance, SBA establishes small business size definitions
(usually referred to as ``size standards'') for private sector
industries in the United States. SBA uses two primary measures of
business size for size standards purposes: average annual receipts and
average number of employees. SBA uses financial assets for certain
financial industries 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 (CDC/504), and 7(a) Loan Programs use either the
industry based size standards or the tangible net worth and net income
based alternative size standard to determine eligibility for those
programs.
In September 2010, Congress passed the Small Business Jobs Act
(Pub. L. 111-240, 124 Stat. 2504 (September 27, 2010)) (Jobs Act)
requiring SBA to review all size standards every five years and make
necessary adjustments to reflect current industry and market
conditions. Section 1831 of the National Defense Authorization Act for
Fiscal Year 2017 (Pub. L. 114-328; December 23, 2016) (NDAA 2017)
directed SBA to establish size standards for all agricultural
enterprises in the same manner as for other industries and to include
them in the five-year rolling review procedures established under
section 1344(a) of the Jobs Act.
In accordance with the Jobs Act, SBA completed the first five-year
review of all size standards (except size standards for agricultural
enterprises) in 2016 \1\ and the second five-year review of size
standards (including size standards for agricultural enterprises in
accordance with NDAA 2017) in 2023,\2\ and made appropriate adjustments
to size standards for a number of industries to reflect current
industry and Federal market conditions. This rule focusing on monetary
based size standards is one of two proposed rules as part of the third
five-year review of size standards under the Jobs Act. The other
proposed rule will focus on employee based size standards and be
published in the near future.
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\1\ See ``A REPORT ON THE FIRST FIVE-YEAR COMPREHENSIVE REVIEW
OF SMALL BUSINESS SIZE STANDARDS UNDER THE SMALL BUSINESS JOBS ACT
OF 2010'' available at https://www.sba.gov/sites/default/files/2023-09/Report%20on%20the%20First%205-Year%20Comprehensive%20Size%20Standards%20Review-508F.pdf.
\2\ See ``A REPORT ON THE SECOND FIVE-YEAR COMPREHENSIVE REVIEW
OF SMALL BUSINESS SIZE STANDARDS UNDER THE SMALL BUSINESS JOBS ACT
OF 2010'', available at https://www.sba.gov/sites/default/files/2023-07/SBA%27s%20Report%20on%20the%20Second%205%20Year%20Review%20of%20Size%20Standards_Final.pdf.
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The number of monetary based size standards reviewed and revised by
NAICS sector during the first five-year comprehensive review of size
standards under the Jobs Act were discussed in the receipts based size
standards proposed rules SBA issued as part of the second five-year
comprehensive review of size standards.\3\ During the second five-year
review of size standards under the Jobs Act, SBA reviewed a total of
534 monetary based size standards and increased 264.
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\3\ See Small Business Size Standards: Agriculture, Forestry,
Fishing and Hunting, Mining, Quarrying, and Oil and Gas Extraction,
Utilities, Construction (85 FR 62239, October 2, 2020), Small
Business Size Standards: Transportation and Warehousing,
Information, Finance and Insurance, Real Estate and Rental and
Leasing (85 FR 62372, October 2, 2020), Small Business Size
Standards: Professional, Scientific and Technical Services,
Management of Companies and Enterprises, Administrative and Support
and Waste Management and Remediation Services (85 FR 72584, November
13, 2020), Small Business Size Standards: Education Services, Health
Care and Social Assistance, Arts, Entertainment and Recreation,
Accommodation and Food Services, Other Services (85 FR 76390,
November 27, 2020), and Small Business Size Standards: Wholesale
Trade and Retail Trade (86 FR 28012, May 25, 2021).
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The analysis of available data at that time suggested that a total
of 237 size standards might be decreased, but in response to ongoing
economic impacts as a result of the COVID-19 pandemic, SBA decided to
retain those size standards at the current levels.\4\ Table 1, Summary
of Monetary Based Size Standards Reviewed in Second Five-Year Review
(NAICS 2017), provides a summary of these revisions by NAICS sector.
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\4\ See Small Business Size Standards: Agriculture, Forestry,
Fishing and Hunting, Mining, Quarrying, and Oil and Gas Extraction,
Utilities, Construction (87 FR 18607, March 31, 2022), Small
Business Size Standards: Transportation and Warehousing,
Information, Finance and Insurance, Real Estate and Rental and
Leasing (87 FR 18627, March 31, 2022), Small Business Size
Standards: Professional, Scientific and Technical Services,
Management of Companies and Enterprises, Administrative and Support
and Waste Management and Remediation Services (87 FR 18665, March
31, 2022), Small Business Size Standards: Education Services, Health
Care and Social Assistance, Arts, Entertainment and Recreation,
Accommodation and Food Services, Other Services (87 FR 18646, March
31, 2022), and Small Business Size Standards: Wholesale Trade and
Retail Trade (87 FR 35869, June 14, 2022).
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Currently, there are 102 different size standards levels, covering
978 NAICS
[[Page 41169]]
industries and 18 subindustries (commonly known as ``exceptions'' in
SBA's table of size standards). Seventy-three of these size levels are
based on average annual receipts covering 496 industries and 13
subindustries (``exceptions''), 27 are based on average number of
employees covering 478 industries and five subindustries
(``exceptions''), one is based on refining capacity covering one
industry, and one is based on average assets covering four industries.
BILLING CODE 8026-09-P
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[GRAPHIC] [TIFF OMITTED] TP22AU25.000
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[GRAPHIC] [TIFF OMITTED] TP22AU25.001
BILLING CODE 8026-09-C
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 December 19, 2022,
was published in the Federal Register on November 17, 2022 (87 FR
69118), which SBA finalized on July 19, 2023, adopting the November
2022 interim rule (88 FR 46048). SBA also updates its size standards,
every five years, to adopt the Office of Management and Budget's (OMB)
quinquennial NAICS revisions to its table of small business size
standards. Effective October 1, 2022, SBA adopted the OMB's 2022 NAICS
revisions to its size standards (87 FR 59240, September 29, 2022).
This proposed rule is one of the two proposed rules that will
review size standards of industries grouped by the type of size
standards measures, i.e., monetary based size standards and employee
based size standards. Rather than review all size standards in one
rule, SBA is reviewing size standards by grouping industries that use
the same size measure (i.e., employees or monetary measures). Once SBA
completes its review of size standards for a group of industries
sharing the same measure of size standards, it issues for public
comments a proposed rule to revise size standards for those industries
based on the latest available data and other factors deemed relevant by
the SBA's Administrator.
Below is a discussion of SBA's recently revised ``Size Standards
Methodology'' (Revised Methodology), issued on September 12, 2024, and
available at www.sba.gov/size, for establishing, reviewing, or
modifying receipts based size standards that SBA has applied to this
proposed rule. SBA examines the structural characteristics of an
industry as a basis to assess industry differences and the overall
degree of competitiveness of an industry and of firms within the
industry. Industry structure is typically examined by analyzing four
primary factors--average firm size, degree of competition within an
industry, start-up costs and entry barriers, and distribution of firms
by size. To assess the ability of small businesses to compete for
Federal contracting opportunities under the current size standards, as
the fifth primary factor, SBA also examines, for each industry
averaging $20 million or more in average annual Federal contract
dollars, the Federal contracting factor in terms of two disparity
ratios. The first disparity ratio measures the small business share of
total contracts relative to the small business share of the total
population of firms that are willing, ready, and able to bid on and
perform Federal contracts. The second disparity ratio represents the
small business share of Federal contract dollars relative to the small
business share in total industry's receipts. When necessary, SBA also
considers other secondary factors that are relevant to the industries
and the interests of small businesses, including impacts of size
standards changes on small businesses.
Size Standards Methodology
SBA has recently revised its Methodology for establishing,
reviewing, or modifying size standards when necessary. See the
notification in the September 12, 2024, edition of the Federal Register
(89 FR 74109). The Revised Methodology is available on SBA's size
standards web page at www.sba.gov/size. Prior to finalizing the Revised
Methodology, SBA issued a notification in the December 11, 2023,
edition of the Federal Register (88 FR 85852) 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 September 12, 2024, Federal Register notification.
The Revised Methodology represents two major changes from the
previous methodology (2019 Methodology), which was issued on April 11,
2019 (84 FR 14587). The first change is to replace the 2019 Methodology
to account for the Federal contracting factor with the disparity ratio
approach. Under the 2019 Methodology, SBA defined the Federal
contracting factor in terms of the difference between the small
business share of total contract obligations and the small business
share of industry' receipts. If the small business share of an industry
total receipts exceeded the small business share of total contract
obligations by ten percentage points or more, all else being the same,
SBA increased that industry's current size standard by certain amount
depending on the amount of that difference. If that difference was less
than ten percentage points, SBA considered that the current size
standard was sufficient with respect to the Federal contracting
factor.\5\
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\5\ For a more detailed explanation of this approach, please see
SBA's 2019 Methodology, available at https://www.sba.gov/document/support-2019-size-standards-methodology-white-paper.
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Under the disparity ratio approach, SBA computes a disparity ratio
as a ratio (instead of the difference) between the small business share
of contract obligations and the small business share of industry
receipts. SBA also computes a second disparity ratio as a ratio between
small business share of the number of contracts and the share of
[[Page 41172]]
small firms in the total population of firms that are willing, ready,
and able to bid on and perform Federal contracts. If an industry's
disparity ratio is less than 0.8, SBA would assume that small
businesses are either materially underrepresented (i.e., the disparity
ratio is 0.5 or greater and less than 0.8) or substantially
underrepresented (i.e., the disparity ratio is less than 0.5) in the
Federal market under that industry's current size standard and would
increase the current size standard as per Table 3 (below). If an
industry's disparity ratio is 0.8 or higher, small businesses are
considered overrepresented (i.e., the disparity ratio is 0.8 or higher
and less than 1.2) or substantially overrepresented (i.e., the
disparity ratio is 1.2 or higher) in the Federal market in that
industry under the current size standard, and that industry's size
standard is maintained at the current level.
The second change is to replace the 20th percentile and 80th
percentile values of industry factors for evaluating size standards at
subindustry levels (``exceptions'') from those calculated based on the
Economic Census data in the 2019 Methodology with those calculated
using the Federal Procurement Data System/System for Award Management
(FPDS/SAM) data under the revised Methodology. This will ensure
consistency between the 20th percentile and 80th percentile values of
industry factors and industry factors for individual exceptions.
SBA does not apply all aspects of its Methodology to all proposed
rules because not all features are relevant for every industry covered
by each proposed rule. For example, since all industries covered by
this proposed rule have receipts based size standards, the Methodology
described in this proposed rule applies only to establishing,
reviewing, or modifying receipts based size standards. SBA's entire
Methodology is available on its website at www.sba.gov/size and on
www.regulations.gov.
Industry Analysis
Congress granted SBA's Administrator discretion to establish
detailed small business size standards. 15 U.S.C. 632(a)(2).
Specifically, section 3(a)(3) of the Small Business Act (15 U.S.C.
632(a)(3)) requires that ``. . . the [SBA] Administrator shall ensure
that the size standard varies from industry to industry to the extent
necessary to reflect the differing characteristics of the various
industries and consider other factors deemed to be relevant by the
Administrator.'' Accordingly, the economic structure of an industry is
the primary basis for establishing, reviewing, or modifying small
business size standards. In addition, SBA considers current economic
conditions, its mission and program objectives, the Administration's
current policies, impacts on small businesses under current size and
proposed or revised size standards, suggestions from industry groups
and Federal agencies, and public comments on the proposed rules. SBA
also examines whether a size standard based on industry and other
relevant data successfully excludes businesses that are dominant in the
industry.
The goal of SBA's size standards review is to determine whether its
existing small business size standards reflect the current industry
structure and Federal market conditions and revise them when the latest
available data suggests that revisions are warranted. Under the current
Methodology, SBA uses the ``percentile'' approach to examine the
industry structure.\6\ Under the percentile approach, for each industry
factor, an industry is ranked and compared with the 20th percentile and
80th percentile values of that factor among the industries sharing the
same measure of size standards (i.e., receipts or employees). Combining
that result with the 20th percentile and 80th percentile values of size
standards among the industries with the same measure of size standards,
SBA computes a size standard supported by each industry factor for each
industry. A more detailed description of the percentile method is
provided in the SBA's Revised Methodology, available at www.sba.gov/size and on www.regulations.gov.
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\6\ As part of revision to its size standards methodology in
conjunction with the second 5-year review of size standards under
the Jobs Act, SBA replaced the previous ``anchor'' size standards
approach to analyzing industry structure with the ``percentile''
approach. The anchor approach is described in the SBA's 2009
Methodology, available at https://www.sba.gov/document/support-2009-size-standards-methodology-white-paper.
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The primary factors that SBA evaluates to examine industry
structure include average firm size, startup costs and entry barriers,
industry competition, and distribution of firms by size. SBA also
evaluates, as an additional primary factor, small business success in
receiving Federal contracting assistance under the current size
standards. These are, generally, the five most important factors SBA
examines when establishing, reviewing, or revising a size standard for
an industry. However, SBA will also consider and evaluate other
secondary factors that it believes are relevant to a particular
industry (such as technological changes, growth trends, SBA financial
assistance, other program factors). SBA also considers possible impacts
of size standard revisions on eligibility for Federal small business
assistance, current economic conditions, the Administration's policies,
and suggestions from industry groups and Federal agencies. Public
comments on proposed rules also provide important additional
information. SBA thoroughly reviews all public comments before making a
final decision on its proposed revisions to size standards. Below are
brief descriptions of each of the five primary factors that SBA has
evaluated for each industry being reviewed in this proposed rule. A
more detailed description of this analysis is provided in the SBA's
Methodology, available at www.sba.gov/size and on www.regulations.gov.
1. Average firm size. SBA computes two measures of average firm
size: simple average and weighted average. For industries with receipts
based size standards, the simple average is the total receipts of the
industry divided by the total number of firms in the industry. The
weighted average firm size is the sum of weighted simple averages in
different receipts size classes, where weights are the shares of total
industry receipts for respective size classes. The simple average
weighs all firms within an industry equally regardless of their size.
The weighted average overcomes that limitation by giving more weight to
larger firms. The size standard supported by average firm size is
obtained by averaging size standards supported by simple average firm
size and weighted average firm size.
If the average firm size of an industry is higher than the average
firm size for most other industries, this would generally support a
size standard higher than the size standards for other industries.
Conversely, if the industry's average firm size is lower than that of
most other industries, it would provide a basis to assign a lower size
standard as compared to size standards for most other industries.
2. Startup costs and entry barriers. Startup costs reflect a firm's
initial size in an industry. New entrants to an industry must have
sufficient capital and other assets to start and maintain a viable
business. If firms entering an industry under review have greater
capital requirements than firms in most other industries, all other
factors remaining the same, this would be a basis for a higher size
standard. Conversely, if the industry has smaller capital needs
compared to most other
[[Page 41173]]
industries, a lower size standard would be considered appropriate.
Given the lack of actual data on startup costs and entry barriers
by industry, SBA uses average assets as a proxy for startup costs and
entry barriers. To calculate average assets, SBA begins with the sales
to total assets ratio for an industry from the Risk Management
Association's Annual Statement Studies, available at www.rmahq.org/estatement-studies. SBA then applies these ratios to the average
receipts of firms in that industry obtained from the Economic Census
tabulation. An industry with average assets that are significantly
higher than most other industries is likely to have higher startup
costs; this in turn will support a higher size standard. Conversely, an
industry with average assets that are similar to or lower than most
other industries is likely to have lower startup costs; this will
support either lowering or maintaining the size standard.
3. Industry competition. Industry competition is generally measured
by the share of total industry receipts generated by the largest firms
in an industry. SBA generally evaluates the share of industry receipts
generated by the four largest firms in each industry. This is referred
to as the ``four-firm concentration ratio,'' a commonly used economic
measure of market competition. Using the four-firm concentration ratio,
SBA compares the degree of concentration within an industry to the
degree of concentration of the other industries with the same measure
of size standards. If a significantly higher share of economic activity
within an industry is concentrated among the four largest firms
compared to most other industries, all else being equal, SBA would set
a size standard that is relatively higher than for most other
industries. Conversely, if the market share of the four largest firms
in an industry is appreciably lower than the similar share for most
other industries, the industry will be assigned a size standard that is
lower than those for most other industries.
4. Distribution of firms by size. SBA examines the shares of
industry total receipts accounted for by firms of different receipts
and employment sizes in an industry. This is an additional factor SBA
considers in assessing competition within an industry besides the four-
firm concentration ratio. If the preponderance of an industry's
economic activity is attributable to smaller firms, this generally
indicates that small businesses are competitive in that industry, which
would support adopting a smaller size standard. A higher size standard
would be supported for an industry in which the distribution of firms
indicates that most of the economic activity is concentrated among the
largest firms.
Concentration is a measure of inequality of distribution. To
determine the degree of inequality of distribution in an industry, SBA
computes the Gini coefficient, using the Lorenz curve. The Lorenz curve
presents the cumulative percentages of units (firms) along the
horizontal axis and the cumulative percentages of receipts (or other
measures of size) along the vertical axis. (For further detail, see the
SBA's Methodology on its website at www.sba.gov/size or
www.regulations.gov.) Gini coefficient values vary from zero to one. If
receipts are distributed equally among all the firms in an industry,
the value of the Gini coefficient will equal zero. If an industry's
total receipts are attributed to a single firm, the Gini coefficient
will equal one.
SBA compares the degree of inequality of distribution for an
industry under review with other industries with the same type of size
standards. If an industry shows a higher degree of inequality of
distribution (hence a higher Gini coefficient value) compared to most
other industries in the group this would, all else being equal, warrant
a size standard that is higher than the size standards assigned to most
other industries. Conversely, an industry with lower degree of
inequality (i.e., a lower Gini coefficient value) than most others will
be assigned a lower size standard relative to others.
5. Federal contracting. Besides the industry factors discussed
above, for industries averaging $20 million dollars or more in total
Federal contract dollars annually, SBA considers a Federal contracting
factor as one of the five primary factors when establishing, reviewing,
or revising size standards. SBA examines the success small businesses
are having in winning Federal contracts under the current size standard
as well as the possible impact a size standard change may have on
Federal small business contracting opportunities. The Small Business
Act requires the Federal government to ensure that small businesses
receive a ``fair share'' of Federal contracts. The legislative history
also discusses the importance of size standards in Federal contracting.
The Federal contracting factor captures the extent to which small
businesses are getting a ``fair share'' of Federal contracts under the
current size standards. Under the current Methodology, a ``fair share''
is assessed in terms of two measures. One is the proportion of total
contracts awarded to small businesses in relation to the proportion of
small businesses in the total population of ``ready, willing, and
able'' firms that are available to bid on or perform Federal contracts.
The second one is the small business share of Federal contract
obligations in an industry relative to the small business share of that
industry's total receipts. Under the current Methodology, SBA accounts
for these measuring using two disparity ratios, as described below.
As discussed in greater detail in the Revised Methodology available
at www.sba.gov/size, a disparity ratio is defined as the ratio between
the utilization ratio and the availability ratio. Representing the two
measures to assess the extent to which small businesses are receiving a
``fair share'' of Federal procurements described above, SBA computes a
disparity ratio using two methods. Under the first method (Disparity
Ratio--Method 1), the utilization ratio is defined in terms of the
small business share of total Federal contracts and the availability
ratio is defined in terms of the proportion of small firms in the total
population of ``ready, willing, and able'' firms that are available to
bid on or perform Federal contracts. Under the second method (Disparity
Ratio--Method 2), the utilization ratio is defined in terms of the
small business share total contract obligations and the availability
ratio is defined in terms of the small business share of total
industry's receipts.\7\
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\7\ This is a refinement to the 2019 Methodology, where SBA
compared the small business share of total contract dollars in each
industry with small business share of that industry's total
receipts. If the small business share of an industry total receipts
exceeded the small business share of total contract dollars by ten
percentage points or more, SBA determined that small businesses were
underrepresented in the Federal marketplace under the current size
standard and a justification existed to increase that industry's
current size standard. If that difference was less than ten
percentage points, SBA considered that small businesses under the
current size standard were represented well in the Federal market
and the current size standard was considered adequate with respect
to the Federal contracting factor.
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If the disparity ratio is equal to 1.0, then there is no disparity
(or there is parity) and small businesses are said to have been awarded
Federal contracts in the same proportion as their representation in the
industry. If the disparity ratio for an industry is 0.8 or higher
(``close to or at parity'' or ``substantially above parity''), small
businesses are said to be represented well in the Federal market, SBA
considers that the current size standard for that industry as adequate.
Small
[[Page 41174]]
businesses are said to be ``materially underrepresented'' in industries
in which the disparity ratio is between 0.5 and 0.8 and ``substantially
underrepresented'' in industries in which the disparity ratio is less
than 0.5. If the disparity ratio for an industry is less than 0.8
(``materially below parity'' or ``substantially below parity''), SBA
considers the current size standard for that industry as inadequate,
thereby warranting an upward adjustment of the current size standard.
Besides the impact on Federal contracting, SBA also examines
impacts on SBA's loan programs both under the current and revised size
standards.
Sources of Industry and Program Data
SBA's primary source of industry data used in this proposed rule
for evaluating industry characteristics and developing proposed size
standards is a special tabulation of the Economic Census from the U.S.
Census Bureau (www.census.gov/econ/census). The tabulation based on the
2017 Economic Census is the latest available. The special tabulation
provides industry data on the number of firms, number of
establishments, number of employees, annual payroll, and annual
receipts of companies by Industry (6-digit level), Industry Group (4-
digit level), Subsector (3-digit level), and Sector (2-digit level).
These data are arrayed by various classes of firms' size based on the
overall number of employees and receipts of the entire enterprise (all
establishments and affiliated firms) from all industries. The special
tabulation also contains information for different levels of NAICS
categories on average and median firm size in terms of both receipts
and employment, total receipts generated by the four and eight largest
firms, the Herfindahl-Hirschman Index (HHI) for the 50 largest firms,
the Gini coefficient, and size distributions of firms by various
receipts and employment size groupings.
In some cases, where data were not available due to disclosure
prohibitions in the Census Bureau's tabulation, SBA either estimated
missing values using available relevant data or examined data at a
higher level of industry aggregation, such as at the NAICS 2-digit
(Sector), 3-digit (Subsector), or 4-digit (Industry Group) level. In
some instances, SBA's analysis was based only on those factors for
which data were available or estimates of missing values were possible.
To evaluate industries that are not covered by the Economic Census,
SBA used a similar special tabulation of the latest County Business
Patterns (CBP) published by the U.S. Census Bureau (www.census.gov/programs-surveys/cbp.html). Similarly, to evaluate industries in NAICS
Sector 11 that are also not covered by the Economic Census and CBP, SBA
evaluated a similar special tabulation based on the 2017 Census of
Agriculture (www.nass.usda.gov) from the National Agricultural
Statistics Service (NASS). Similarly, to evaluate certain financial
industries that have assets based size standards SBA examined the data
from the Statistics on Depository Institutions (SDI) database and
(https://www7.fdic.gov/sdi/download_large_list_outside.asp) of the
Federal Depository Insurance Corporation (FDIC) data and data from
National Credit Union Administration (NCUA) (https://ncua.gov/analysis/credit-union-corporate-call-report-data/quarterly-data).
To calculate average assets, SBA used sales to total assets ratios
from the Risk Management Association's (RMA) Annual Statement Studies,
2021-2023 (www.rmahq.org/estatement-studies/). To evaluate the Federal
contracting factor (i.e., disparity ratios) and exceptions and to
determine impacts of size standards changes on small business access to
Federal contracting, SBA examined the data on Federal prime contract
awards from the FPDS (www.fpds.gov) for fiscal years 2021-2023. To
assess the impact on financial assistance to small businesses, SBA
examined its internal data on 7(a), CDC/504, micro, and economic injury
disaster (EID) loan programs for fiscal years 2021-2023. SBA also
evaluated the data from the SAM (www.sam.gov) to determine disparity
ratios, industry factors for some exceptions, and impacts of size
standards changes.
Data sources and estimation procedures SBA uses in its size
standards analysis are documented in greater detail in the SBA's
Revised Methodology, which is available at www.sba.gov/size and on
www.regulations.gov.
Dominance in Field of Operation
Section 3(a) of the Small Business Act (15 U.S.C. 632(a)) defines a
small business concern as one that is: (1) independently owned and
operated; (2) not dominant in its field of operation; and (3) within a
specific small business definition or size standard established by SBA
Administrator. SBA considers as part of its evaluation whether a
business concern at a proposed or revised size standard would be
dominant in its field of operation. For this, SBA generally examines
the industry's market share of firms at the proposed or revised size
standard as well as the distribution of firms by size. Market share and
size distribution may indicate whether a firm can exercise a major
controlling influence on a national basis in an industry where a
significant number of business concerns are engaged. If a contemplated
size standard is found to include a dominant firm, SBA will consider a
lower size standard to exclude the dominant firm from being defined as
small.
Selection of Size Standards
In the 2009 Methodology that SBA applied to the first five-year
comprehensive review of size standards under the Jobs Act, SBA adopted
a fixed number of size standards levels as part of its effort to
simplify size standards. In response to public comments to the 2009
Methodology, and the 2013 amendment to the Small Business Act (section
3(a)(8)) under section 1661 of the National Defense Authorization Act
for Fiscal Year 2013 (NDAA 2013) (Pub. L. 112-239, January 2, 2013), in
the 2019 Methodology, SBA relaxed the limitation on the number of small
business size standards. Specifically, section 1661 of NDAA 2013 states
``SBA cannot limit the number of size standards, and shall assign the
appropriate size standard to each industry identified by NAICS.''
As in the 2019 Methodology, in the Revised Methodology, SBA
calculates a separate size standard for each 6-digit NAICS industry.
However, to account for errors and limitations associated with various
data SBA evaluates in the size standards analysis, SBA rounds the
calculated size standard value for a receipts based size standard to
the nearest $500,000, except for agricultural industries in Subsectors
111 and 112 for which the calculated size standards will be rounded to
the nearest $250,000. This rounding procedure is applied both in
calculating a size standard for each of the five primary factors and in
calculating the overall size standard for the industry.
As a policy decision, SBA continues to maintain the minimum and
maximum levels for both receipts based and employee based size
standards. Accordingly, SBA will not generally propose or adopt a size
standard that is either below the minimum level or above the maximum,
even though the calculations yield values below the minimum or above
the maximum. The minimum size standard reflects the size an established
small business should be to have adequate capabilities and resources to
be able to compete for and perform Federal contracts (but does not
account for small businesses that are newly formed or just starting
[[Page 41175]]
operations). On the other hand, the maximum size standard represents
the size above which businesses, if qualified as small, would
outcompete much smaller businesses when accessing Federal assistance.
With respect to receipts based size standards, SBA has established
$8 million and $47 million, respectively, as the minimum and maximum
size standard levels (except for most agricultural industries in NAICS
Subsectors 111 and 112). These levels reflect the current minimum of $8
million and the current maximum of $47 million. The industry data
suggests that the $8 million minimum and $47 million maximum size
standards would be too high for agricultural industries. Accordingly,
SBA has established $2.25 million as the minimum size standard and $5.5
million as the maximum size standard for industries in Subsector 111
(Crop Production) and Subsector 112 (Animal Production and
Aquaculture).
Evaluation of Industry Factors
As mentioned earlier, to assess the appropriateness of the current
size standards, SBA evaluates the structure of each industry in terms
of four economic characteristics or factors, namely average firm size,
average assets size as a proxy for startup costs and entry barriers,
the four-firm concentration ratio as a measure of industry competition,
and size distribution of firms using the Gini coefficient. For each
size standard type (i.e., receipts based or employee based), SBA ranks
industries both in terms of each of the four industry factors and in
terms of the existing size standard and computes the 20th percentile
and 80th percentile values for both. SBA then evaluates each industry
by comparing its value for each industry factor to the 20th percentile
and 80th percentile values for the corresponding factor for industries
under a particular type of size standard.
If the characteristics of an industry under review within a
particular size standard type are similar to the average
characteristics of industries within the same size standard type in the
20th percentile, SBA will consider adopting as an appropriate size
standard for that industry the 20th percentile value of size standards
for those industries. For each size standard type, if the industry's
characteristics are similar to the average characteristics of
industries in the 80th percentile, SBA will assign a size standard that
corresponds to the 80th percentile in the size standard rankings of
industries. A separate size standard is established for each factor
based on the amount of differences between the factor value for an
industry under a particular size standard type and 20th percentile and
80th percentile values for the corresponding factor for all industries
in the same type. Specifically, the actual level of the new size
standard for each industry factor is derived by a linear interpolation
using the 20th percentile and 80th percentile values of that factor and
corresponding percentiles of size standards. Each calculated size
standard is bounded between the minimum and maximum size standards
levels, as discussed before. As noted earlier, the calculated value for
a receipts based size standard for each industry factor is rounded to
the nearest $500,000, except for industries in Subsectors 111 and 112
for which a calculated size standard is rounded to the nearest
$250,000.
Table 2, 20th and 80th Percentiles of Industry Factors for Receipts
Based Size Standards, shows the 20th percentile and 80th percentile
values for average firm size (simple and weighted), average assets
size, four-firm concentration ratio, and Gini coefficient for
industries with receipts based size standards.
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Estimation of Size Standards Based on Industry Factors
An estimated size standard supported by each industry factor is
derived by comparing its value for a specific industry to the 20th
percentile and 80th percentile values for that factor. If an industry's
value for a particular factor is near the 20th percentile value in the
distribution, the supported size standard will be one that is close to
the 20th percentile value of size standards for industries in the size
standards group, which is $13.5 million. If a factor for an industry is
close to the 80th percentile value of that factor, it would support a
size standard that is close to the 80th percentile value in the
distribution of size standards, which is $40 million. For a factor that
is within, above, or below the 20-80th percentile range, the size
standard is calculated using linear interpolation based on the 20th
percentile and 80th percentile values for that factor and the 20th
percentile and 80th percentile values of size standards.
For example, if an industry's simple average receipts are $1.9
million, that would support a size standard of $16.5 million. According
to Table 2, the 20th percentile and 80th percentile values of average
receipts are $1.09 million and $8.34 million, respectively. The $1.9
million is 11.2 percent between the 20th percentile value ($1.09
million) and the 80th percentile value ($8.34 million) of simple
average receipts (($1.9 million-$1.09 million) / ($8.34 million-$1.09
million) = 0.112 or 11.2%). Applying this percentage to the
[[Page 41176]]
difference between the 20th percentile value ($13.5 million) and 80th
percentile ($40 million) value of size standards and then adding the
result to the 20th percentile size standard value ($13.5 million)
yields a calculated size standard value of $16.46 million ([{$40
million-$13.5 million{time} * 0.112] + $13.5 million = $16.46
million). The final step is to round the calculated $16.46 million size
standard to the nearest $500,000, which in this example yields $16.5
million. This procedure was applied to calculate size standards
supported by other industry factors.
Detailed formulas involved in these calculations are presented in
the SBA's Revised Methodology, which is available on its website at
www.sba.gov/size and on www.regulations.gov.
Derivation of Size Standards Based on Federal Contracting Factor
As discussed above, besides industry structure, SBA also evaluates
Federal contracting data to assess the success of small businesses in
getting Federal contracts under the existing size standards. For each
industry with $20 million or more in annual Federal contract dollars,
SBA computes two disparity ratios to account for the Federal
contracting factor. The first disparity ratio (Disparity Ratio--Method
(1) captures the extent to which small businesses are receiving a
``fair share'' of contracts relative to total number of Federal
contracts in an industry. The second disparity ratio (Disparity Ratio-
Method (2) measures the extent to which small businesses are receiving
a ``fair share'' of Federal contract obligations relative to total
obligations in an industry. All other factors being equal, if the
disparity ratio is less than 0.8, either materially or substantially
below parity, a justification would exist for considering a size
standard higher than the current size standard. Conversely, if the
disparity ratio is 0.8 or higher, close to or at parity or
substantially above parity, this will support the current size
standard.
SBA increases the existing size standards by certain percentages
when the disparity ratio is materially below parity (i.e., >= 0.5 to
<0.8) or substantially below parity (i.e., <0.5). The amount of
increases to size standards based on disparity ratios is contingent
upon (1) whether the ratio is materially or substantially below parity,
and (2) the level of current size standards. These proposed percentage
increases for receipts-based size standards are given in Table 3,
Proposed Adjustments to Receipts Based Size Standards Based on
Disparity Ratio. As explained previously, adjusted receipts based size
standards are rounded to the nearest $500,000 (or nearest $250,000 for
receipts based size standards in Subsectors 111 and 112).
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For example, if an industry with the current size standard of $19.5
million had disparity ratios of 0.6174 (i.e., materially below parity)
and 0.3006 (i.e., substantially below parity) for Method 1 and Method
2, respectively. According to the above rule in Table 3, the new size
standard for the first disparity ratio (Method 1) for that industry
would be set by multiplying the current $19.5 million standard by 1.3
(i.e., 30% increase) and then by rounding the result to the nearest
$500,000, yielding a size standard of $25.5 million. Similarly, the new
size standard for the second disparity ratio would be set by
multiplying the current $19.5 million standard by 1.6 (i.e., 60%
increase) and then by rounding the result to the nearest $500,000,
yielding a size standard of $31 million. By averaging the size
standards supported by the two disparity ratios and then by rounding
the result to the nearest $500,000 would yield a size standard $28.5
million for the Federal contracting factor.
Of the 513 industries or subindustries (``exceptions'') reviewed in
this proposed rule, SBA evaluated the disparity ratios for 207
industries/subindustries that had $20 million or more in average annual
Federal contract dollars during fiscal years 2021-2023. Based on Method
1, the disparity ratio value was 0.8 or higher for 69 industries/
subindustries, between 0.5 and 0.8 for 67 industries/subindustries, and
less than 0.5 for 63 industries/subindustries. According to Method 2,
the disparity ratio value was 0.8 or higher for 129 industries/
subindustries, between 0.5 and 0.8 for 21 industries/subindustries, and
less than 0.5 for 54 industries/subindustries. These results by NAICS
sector are shown in Table 4, Number of Industries with Receipts Based
Size Standards by Values of Disparity Ratios (NAICS 2022). Due to the
lack of relevant data, SBA could not compute the disparity ratio(s) for
a few industries. Based on the disparity ratio results, the Federal
contracting factor resulted in increases to size standards for 122
industries/subindustries and no change to size standards for 81
industries/subindustries.
Derivation of Overall Industry Size Standard
The SBA's Revised Methodology presented above results in five
separate size standards based on evaluation of the five primary factors
(i.e., four industry factors and one Federal contracting factor). SBA
typically derives an industry's overall size
[[Page 41177]]
standard by assigning equal weights to size standards supported by each
of these five factors. However, if necessary, SBA's Revised Methodology
would allow assigning different weights to some of these factors for
certain industries in response to its policy decisions and other
considerations. For detailed calculations, see the SBA's Revised
Methodology, available on its website at www.sba.gov/size and on
www.regulations.gov.
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BILLING CODE 8026-09-C
[[Page 41179]]
Calculated Size Standards Based on Industry and Federal Contracting
Factors
Table 5, Size Standards Supported by Each Factor for Each Industry
(Receipts), below, shows the results of analyses of industry and
Federal contracting factors for each industry and subindustry
(exception) covered by this proposed rule. NAICS industries in columns
2, 3, 4, 5, 6, 7, 8, and 9 show two numbers. The upper number is the
value for the industry or Federal contracting factor shown on the top
of the column and the lower number is the size standard supported by
that factor. Column 10 shows a calculated new size standard for each
industry. This is the average of the size standards supported by each
factor. The size standard for average firm size is an average of size
standards supported by simple average firm size and weighted average
firm size. Similarly, the size standard for the Federal contracting
factor is an average of size standards supported by two disparity
ratios (Methods 1 and 2). The calculated size standards for each factor
and overall size standards are rounded to the nearest $500,000 for non-
agriculture industries and rounded to the nearest $250,000 for
agriculture industries. Analytical details involved in the averaging
procedure are described in SBA's Revised Methodology, which is
available on its website at www.sba.gov/size and on
www.regulations.gov. For comparison with the calculated new size
standards, the current size standards are in column 11 of Table 5.
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BILLING CODE 8026-09-C
[[Page 41216]]
Methodology for Agricultural Size Standards
As stated elsewhere in this rule, NDAA 2017 directed SBA to
establish the size standards for agricultural industries in NAICS
Subsectors 111 and 112 in the same manner that the Agency establishes
the size standards for other industries and to include them in the
five-year rolling review under the Jobs Act. Accordingly, in this
proposed rule, SBA has evaluated those industries using the same
industry and Federal contracting factors that it uses in evaluating
characteristics of all other industries and their size standards.
However, the industry data from the 2017 Agricultural Census tabulation
reveals that firms in agricultural industries are much smaller than
those in all other industries with receipts based size standards.
Therefore, as stated earlier, based on the data, SBA has established
$2.25 million and $5.5 million as the minimum and maximum receipts
based size standard levels, respectively, for agricultural industries,
as opposed to $8 million as the minimum and $47 million as the maximum
receipts based size standard levels for all other industries. As shown
in Table 2 (above), except for the Gini coefficient, the 20th
percentile and 80th percentile values of industry factors are much
lower for agricultural industries in Subsectors 111 and 112 (except
NAICS 112112 and 112310) than those for other industries with receipts
based size standards. Similarly, SBA rounds a calculated receipts based
size standard for agricultural industries to the nearest $250,000
instead of rounding it to the nearest $500,000 as for other industries.
Of the 46 NAICS 6-digit industries in Subsectors 111 and 112, the
special tabulation of the 2017 Census of Agriculture provided data for
36 industries at the NAICS 6-digit level. Of the remaining ten (10),
seven (7) were aggregated at three different 5-digit NAICS levels and
three (3) were aggregated at one 4-digit NAICS level. SBA ranked these
40 industry categories (i.e., thirty-six (36) 6-digit, three (3) 3-
digit, and one (1) 4-digit) in terms of each industry factor and
obtained the 20th percentile an 80th percentile values for each factor.
The results are shown in Table 2. Based on the current size standards
for industries in Subsectors 111 and 112, SBA computed $2.5 million as
the 20th percentile and $4 million as 80th percentile values of size
standards for agricultural industries. Combining these results with the
20th percentile and 80th percentile values of industry factors for
agricultural industries in Table 2, SBA computed a size standard for
each factor for each industry. These results are provided in Table 5,
above.
For the 10 industries for which the data did not exist at the 6-
digit NAICS level, SBA estimated the size standard at the 5- or 4-digit
NAICS level at which the data were available and applied the same
results to the relevant 6-digit NAICS levels. These results are shown,
below, in Table 7, Calculated Agricultural Size Standards at the 4- or
5-Digit NAICS Level Matched to the 6-Digit Level.
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BILLING CODE 8026-09-C
Evaluation of Size Standards for Subindustry Categories or
``Exceptions''
The SBA's table of size standards contains 13 receipts based size
standards for subindustry categories below the six-digit NAICS level,
which are commonly referred to as ``exceptions'' and used specifically
for Federal Government contracting purposes. The data from the Census
Bureau's 2017 Economic Census special tabulation are limited to the
six-digit NAICS industry level and therefore do not provide information
on economic characteristics of firms at the subindustry level. In
accordance with SBA's approach to evaluating size standards for
subindustry categories (or ``exceptions''), SBA has evaluated the 13
exceptions covered by this rule using the procedures described in the
SBA's Revised Methodology. Specifically, SBA uses data from FPDS and
SAM to derive the industry and Federal contracting factors to evaluate
size standards at the subindustry levels. Under the Revised
Methodology, the Agency also uses the same data sources to derive the
20th and 80th percentile values of industry factors to evaluate
exceptions. Based on the FPDS/SAM data for fiscal years 2021-2023, the
20th percentile and 80th percentile values of industry factors for
receipts based exceptions are shown in Table 7, 20th and 80th
Percentiles of Industry Factors for Receipts Based Exceptions, below.
The results from the analyses of receipts based exceptions are
discussed in the following subsections.
[[Page 41218]]
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Forest Fire Suppression and Fuel Management Services Exceptions
Forest Fire Suppression and Fuels Management Services are two
subindustry categories or ``exceptions'' under NAICS 115310 (Support
Activities for Forestry), each with the current size standard of $34
million in average annual receipts. In 2003, SBA established a
different size standard for these subindustry activities (68 FR 33348,
June 4, 2003). In 2013, as part of the first five-year review of size
standards under the Jobs Act, SBA maintained the then existing $17.5
million as the size standard for these exceptions (78 FR 37398; June
20, 2013), and subsequently, as part of the 2014 adjustment to monetary
based size standards for inflation, the Agency increased the size
standard from $17.5 million to $19 million (79 FR 33647, June 12,
2014), and as part of the 2019 inflationary adjustment of monetary
based size standards, it was increased from $19 million to $20.5
million (84 FR 34261, July 18, 2019).
In 2020, as part of the second five-year review of size standards
under the Jobs Act, SBA proposed $25 million as the size standard for
both Forest Fire Suppression and Fuel Management Services exceptions.
The data supported $23.5 million but SBA proposed a higher $25 million
for the reasons discussed in the October 2020 proposed rule (85 FR
62239; October 2, 2020). In the final rule, in response to public
comments and results from more recent data, SBA adopted a $30 million
size standard for these exceptions (87 FR 18607; March 31, 2022), which
was subsequently increased to $34 million as part of the 2022
adjustment of monetary based size standards for inflation (87 FR 69118;
November 17, 2022).
The data from the 2017 Census Bureau and NASS 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. As such, SBA relied upon data from other sources to evaluate the
current $34 million size standard for both exceptions.
Firms engaged in the Forest Fire Suppression and Fuels Management
Services subindustries or exceptions were identified from the
contracting data reported in FPDS during fiscal years 2021-2023 and
data obtained from the USDA Forest Service. Specifically, the contracts
under Forest Fire Suppression and Fuels Management Services exceptions
can be identified as those classified within NAICS 115310 under the
Product and Services Code (PSC) F003 (Natural Resources/Conservation--
Forest-Range Fire Suppression/Presuppression). SBA also evaluated the
contract data from the USDA Forest Service National Interagency Fire
Center (https://www.fs.fed.us/managing-land/fire and http://www.fs.fed.us/business/incident/vipr.php). SBA also evaluated the
description of requirements of the contracts for Forest Fire
Suppression and Fuels Management Services in FPDS to identify principal
activities related to forest fire suppression and fuel management
services and to differentiate them from other support activities for
forestry. SBA identified activities associated with specialized crews,
equipment and engines with trained personnel that are critical to
perform the tasks of suppressing or managing fires as principal
activities and other activities, such as leases of equipment, machinery
and transportation vehicles, or provision of services that do not
require specialized personnel or training as supporting activities.
Since most firms involved in Fire Suppression Services were also found
to be involved in Fuels Management Services and vice versa, SBA
analyzed the two exceptions as one subindustry category.
Additionally, SBA obtained receipts and employment data on forest
fire suppression contractors for the fiscal years 2021-2023 from FPDS
and SAM to develop industry and Federal contracting factors for
evaluating the size standard for the two exceptions. SBA chose firms
with receipts greater than zero and less than $1 billion. For the
forest fire suppression industry, firms with receipts over $1 billion
are outliers and their revenues would skew the data. For firms with
receipts over $1 billion, Federal forest suppression contracts
contributed to less than 0.01 percent of their total receipts.
Similarly, firms with receipts at or below zero have insignificant
contributions to total Federal contract dollars obligated to the fire
suppression industry.
Finally, SBA also excluded from analysis firms with more than 1,500
employees, as fire suppression is not the primary activity for
enterprises with over 1,500 employees. For example, for companies with
over 1,500 employees, fire suppression contract dollars accounted for
less than 0.01 percent of their total receipts.
Table 8, below, shows the results from the analysis of these
subindustries, which support a $20 million receipts based size standard
for Forest Fire Suppression and Management Services exceptions compared
to the current $34 million. SBA also evaluated information from
agencies that deal with fire suppression activity, and analyzed the
effects of the time and intensity increases of the wildfire activity.
Given the inherent uncertainty of forest fires and recent surges in
forest fire incidents and significantly extended fire seasons in recent
years, SBA believes that contracting officers need flexibility to hire
enough small businesses, especially in the worst-case scenario. In a
very busy fire season, it is plausible to assume fire seasons of 180
days of shifts of 14 hours. A crew generally consists of 18-20
firefighters. Therefore, for 6 crews (i.e., the average number of crews
[[Page 41219]]
among a sample of firefighting contractors during 2021-2024) with 20
firefighters each at 61 dollars per person per hour (the average hourly
rate estimated from a sample of fire suppression contracts for 2021 to
2024), for a season of 180 days and shifts of 14 hours, the total
revenue is about $18 million. For firms with 11 crews, the total
revenue could easily reach $34 million. These estimates consider only
the revenue from firefighting activities during the fire seasons, not
the revenue from non-firefighting activities during the off-seasons.
The hourly forest fire suppression costs have increased about 42
percent since the last review of the Forest Fire Suppression and Fuel
Management Services exception size standard, mainly due to increases in
hourly wages, equipment, and material costs. The hourly rates include
only payments to firefighters that relate to direct fire suppression
activities, including wages, materials, equipment, vehicles, insurance,
etc. These amounts do not include payments for fire engines, water
tenders, food caterers, etc., which are classified under different
NAICS codes.
SBA methodological analysis supports a $20 million size standard
for Forest Fire Suppression and Fuel Management Services exceptions.
Nevertheless, given the recent increases to the wildfire activity and
fire suppression costs and its proposed policy of not diminishing any
size standards even if analytical results might support decreases to
size standards, SBA proposes to keep the size standard for the Forest
Fire Suppression and Fuels Management Services exceptions at $34
million, and seeks comments on this proposal.
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BILLING CODE 8026-09-C
Dredging and Surface Cleanup Activities
The Dredging and Surface Cleanup Activities (Dredging) size
standard is an exception established by SBA within NAICS 237990 (Other
Heavy and Civil Engineering Construction). As stated previously, the
data from the Census Bureau's special tabulation of the Economic Census
is limited to the 6-digit NAICS industry level, and hence, does not
provide separate data at the subindustry level to evaluate exceptions.
Accordingly, SBA relied upon the data from other sources to evaluate
the current $37 million size standard for Dredging.
SBA identified firms engaged in the Dredging subindustry using the
contract awards data within NAICS 237990 in FPDS for fiscal years 2021-
2023. Specifically, dredging contracts were identified as those
classified under one of the following Product and Service Codes (PSCs):
C1KF--Architect and Engineering Construction--Dredging Facilities;
M1KF--Operation of Dredging Facilities; X1KF--Lease/Rental of Dredging
Facilities; Y1KF--Construction of Dredging Facilities; Y216--
Construction of Dredging; Z1KF--Maintenance of Dredging Facilities;
Z2KF--Repair or Alternation of Dredging Facilities; Z216--Maintenance,
Repair or Alteration of Dredging; and 1955--Dredges.
SBA obtained receipts and employment data for the identified
Dredging firms from SAM and FPDS to develop industry and Federal
contracting factors for Dredging. Contracting data from the US Army
Corps of Engineers' Navigation and Civil Works Decision Support Center
(NDC) and annual reports from Dredging Contractors of America (DCA)
were also considered, but not included in the analysis as neither
provide business size and have lower Dredging firm coverage than FPDS.
Firms with extreme observations, firms with joint venture contracts,
and those for which Dredging Federal contracts dollars accounted for a
very small percentage of their average annual receipts were excluded
from the analysis. Following these data cleaning steps, SBA evaluated
128 resultant Dredging firms that have received Federal contracts under
NAICS 237990 and the above PSCs during fiscal years 2021-2023.
[[Page 41220]]
Recently adopted methodological changes that impact calculated size
standards include: (1) Replacing the 2019 Methodology for computing the
Federal contracting factor with the disparity ratio approach to
evaluate all industries and subindustries or ``exceptions,'' and (2)
Using standardized FPDS/SAM data in place of Economic Census data for
computation of the 20th percentile and 80th percentile values of
industry factors to evaluate exceptions. The 20th percentile and 80th
percentile values of industry factors for receipts based exceptions can
be found on Table 7, above. The disparity ratio thresholds and amounts
of size standards adjustments can be found on Table 3, above.
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Table 9, Size Standards Supported by Each Factor for Dredging
Exception to NAICS 237990 ($ Million), above, shows the results from
the analysis of the Dredging subindustry that support lowering the
current $37 million size standard for the Dredging exception to $21.5
million. As shown in Table 5, the results for overall NAICS 237990 also
yields a smaller calculated size standard of $30 million, as compared
to the current size standard of $45 million. Thus, while the latest
available industry and Federal contracting data support lowering the
size standards for both overall NAICS 237990 and Dredging, the results
still support maintaining a distinct, lower size standard for Dredging.
Of the 128 Dredging firms that received Federal contracts during
fiscal years 2021-2023, 110 (or 85.9%) would be considered small under
the current $37 million size standard. Under the calculated $21.5
million size standard, 97 firms (or 75.8%) would be considered small.
Thus, 11.8 percent of currently small Dredging firms receiving Federal
contracts would be impacted if SBA were to adopt the calculated $21.5
million size standard for Dredging.
For the reasons for not decreasing size standards discussed
elsewhere in this proposed rule, SBA is proposing to maintain the
current size standard of $45 million for the overall NAICS 237990 and
the current size standard of $37 million for the Dredging exception
even if the data suggested that both size standards might be decreased.
However, SBA is seeking comments on whether Dredging should continue to
be treated as an exception to NAICS 237990 or if it should be
eliminated and subject it to the same overall NAICS 237990 industry
size standard.
Non-Vessel Owning Common Carriers and Household Goods Forwarders
Non-Vessel Owning Common Carriers and Household Good Forwarders
(NVOCCHGF) is an ``exception'' or subindustry under NAICS 488510
(Freight Transportation Arrangement), with the size standard of $34
million in average annual receipts. As stated above, the data that SBA
receives from the Census Bureau's Economic Census special tabulation
are limited to the 6-digit NAICS industry level and therefore do not
provide information on economic characteristics of firms at the sub-
industry level. Thus, for reviewing or modifying size standards at the
subindustry levels (``exceptions''), SBA normally evaluates the data
from FPDS and SAM using a two-step procedure. First, using FPDS, SBA
identifies Product and Service Codes (PSCs) that correspond to specific
exceptions. SBA then identifies firms that have received Federal
contracts under those PSCs and
[[Page 41221]]
evaluates their receipts and employee data from SAM and FPDS to derive
the values for industry and Federal contracting factors.
Contracting activity for NAICS 488510 including the NVOCCHGF
exception is distributed over 70 different PSCs. Using FPDS data for
fiscal years 2021-2023, SBA identified five primary PSCs that
correspond to the overall industry including the exception, accounting
for 97.8 percent of total dollars obligated on NAICS 488510. These PSCs
are V119 (Transportation/Travel/Relocation--Transportation: Other),
V111 (Transportation/Travel/Relocation--Transportation: Air Freight),
V112 (Transportation/Travel/Relocation--Transportation: Motor Freight),
R706 (Support--Management: Logistics Support), and V115
(Transportation/Travel/Relocation--Transportation: Vessel Freight). The
top PSC, V119, alone accounts for nearly 80 percent of total dollars
obligated to NAICS 488510. Table 10, Top Five PSCs of NAICS 488510 and
Average Dollars Obligated, Fiscal Years 2021-2023, below, identifies
these five PSCs and their average annual total dollars obligated for
the fiscal years 2021-2023.
SBA analyzed the contracting activities under these PSCs, but the
Agency was unable to reliably differentiate the level of activity
corresponding to the NVOCCHGF exception versus the overall NAICS 488510
industry, and hence to identify any PSCs that would correspond uniquely
to the exception.
[GRAPHIC] [TIFF OMITTED] TP22AU25.045
SBA also reviewed the distribution of Federal contracts awarded to
small and other than small businesses in the overall NAICS 488510
industry for fiscal years 2022-2023. SBA found that only about $6
million or 1.4 percent of the $422 million obligated to the overall
NAICS 488510 industry went to small businesses. Thus, while the total
contracting dollars obligated to all firms in the industry is
significant, the total dollars obligated to small firms is not.
Additionally, the top agencies using NAICS 488510 are Departments of
Army and Navy, which account for 92.4 percent of total dollars
obligated during the period evaluated.
To differentiate the NVOCCHGF exception from the overall NAICS
488510 industry and to determine its economic characteristics, as part
of the second five-year review of size standards, in the 2020 proposed
rule (85 FR 62372, October 2, 2020), SBA evaluated the 2012 Economic
Census subindustry data found in the U.S. Census Bureau American
FactFinder. The 2012 Economic Census data divided NAICS 488510 in two
sub-components identified with an additional digit (such break down was
not available in the 2017 Economic Census data). The first 7-digit
NAICS 4885101 corresponded to Freight Forwarders and the second 7-digit
NAICS 4885102 corresponded to Arrangement of Transportation of Freight
and Cargo. The NAICS 4885101 includes non-vessel operating common
carrier (NVOCC) service as one of the principal activities. SBA
understood that NAICS 4885101 corresponds to the activity classified as
an exception to the general NAICS 6-digit 488510. NAICS 4885101
includes multimodal activities supporting transportation, and the firms
assume responsibility for delivery of the goods.\9\
---------------------------------------------------------------------------
\9\ The Census definition is: ``This U.S. Census Bureau NAICS-
based industry comprises establishments primarily engaged in
undertaking the transportation of goods from shippers to receivers
for a charge covering the entire transportation, and in turn making
use of the services of various freight carriers in affecting
delivery, paying transportation charges, and assuming responsibility
for delivery of the goods. There is no relationship between shippers
and the various freight carriers delivering the goods.''
---------------------------------------------------------------------------
In the 2020 proposed rule, SBA compared the economic
characteristics of NAICS 4885101 to those for the
[[Page 41222]]
overall industry and found them to be similar. The results are provided
in Table 6 of the 2020 proposed rule (p. 62382), Industry Comparison
NAICS 488510 and NAICS 4885101. Despite the similarities between the
overall NAICS 488510 industry and the NVOCCHGF exception, in light of
important distinctions between freight forwarders and NVOCCs, as
discussed in the 2020 proposed rule, SBA proposed to retain the
exception with a higher $30 million size standard than the proposed
$17.5 million size standard for the overall industry, which SBA adopted
in the final rule (87 FR 18627, March 31, 2022).
Nevertheless, in this proposed rule, considering similarities in
economic characteristics between the NVOCCHGF exception and the overall
NAICS 488510 industry, absence of uniquely identifiable PSCs
corresponding to the exception, and a lack of other industry data to
adequately evaluate the exception industry, SBA is proposing to
eliminate the NVOCCHGF exception to NAICS 488510. Furthermore,
considering very low utilization of small businesses in Federal
contracting under the current size standard, SBA proposes to apply to
the general NAICS 488510 industry a higher $34 million size standard
that currently applies to the NVOCCHGF exception. The evaluation of the
most industry and Federal contracting factors of firms receiving
Federal contracts under the above mentioned top five PSCs in NAICS
488510 using the FPDS data also suggests that a size standard that is
significantly higher than the current $20 million standard is warranted
for NAICS 488510. Additionally, the proposed higher $34 million size
standard would enable firms that currently qualify as small under the
NVOCCHGF exception size standard to continue their eligibility for
small business assistance. Finally, this is also consistent with SBA's
proposed policy of not decreasing any size standards except for
excluding dominant firms from qualifying as small.
SBA invites comments, along with supporting information, on this
proposal as well as suggestions on whether the proposed elimination of
the NVOCCHGF exception to NAICS 488510 and the application of the
proposed $34 million for the overall NAICS 488510 industry are
appropriate, even though the analytical results support a lower $23.5
million size standard for that industry.
Exception to NAICS Industry Group 5311 (Lessors of Real Estate):
Leasing of Building Space to the Federal Government by Owners
The current size standard for Federal contracts for Leasing of
Building Space to Federal Government by Owners (``exception'' to NAICS
Industry Group 5311 (NAICS 531110, 531120, 531130, and 531190)) is $47
million in average annual receipts. This size standard applies only to
certain Federal contracting opportunities that meet specific criteria.
Footnote 9 of SBA's table of size standards (13 CFR 121.201) reads:
``For Government procurement, a size standard of $47 million in gross
receipts applies to the owners of building space leased to the Federal
Government. This size standard does not apply to an agent.''
To determine if the current $47 million size standard to the
exception is appropriate, SBA evaluated average firm size, average
assets size, market concentration, and size distribution of firms
involved in Leasing of Building Space to Federal Government by Owners.
SBA used data from FPDS and SAM and followed the two-step procedure
described in Revised Methodology. Based on the data for fiscal years
2021-2023, Federal contracts awarded to NAICS 531110, 531120, 531130,
and 531190 averaged about $203 million annually, with the largest
percentage going to NAICS 531120 (55.2%). First, SBA chose to analyze
firms that were awarded contracts to the following Product and Service
Codes (PSCs): X111/X1AA (Lease/Rental of Office Buildings), X1FA
(Lease/Rental of Family Housing Facilities), X1AZ (Lease/Rental of
Other Administrative Facilities and Service Buildings), X1FZ (Lease/
Rental of Other Residential Buildings), and X1GZ/X179 (Lease/Rental of
Other Warehouse Buildings) across the four industries within NAICS
Industry Group 5311. As shown in Table 11, Selected PSCs in NAICS
Industry Group 5311 and Average Total Dollars Obligated, Fiscal Years
2021-2023, below, dollars obligated to these PSCs averaged $97 million
annually in fiscal years 2021-2023, which represents 47.9 percent of
total dollars obligated to these four NAICS 6-digit industries. The
Lease/Rental of Office Buildings, X111/X1AA, alone, accounted for 30.3
percent. Then, SBA evaluated the size and contract data on those firms
from FPDS and SAM to obtain industry and Federal contracting factors.
The results, as shown in Table 12, Size Standards Supported by Each
Factor for Leasing of Building Space to the Federal Government by
Owners Exception to NAICS 5311 ($ Million), below, support a size
standard of $43.5 million.
However, for reasons for not decreasing size standards as explained
elsewhere in this proposed rule, SBA is retaining the current $47
million size standard for Leasing of Building Space to the Federal
Government by Owners, even though the analytical results support a
lower $43.5 million size standard.
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[[Page 41223]]
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Exceptions to NAICS 541330: Military and Aerospace Equipment and
Military Weapons; Contracts and Subcontracts for Engineering Services
Awarded Under the National Energy Policy Act of 1992; Marine
Engineering and Naval Architecture
Currently, NAICS 541330 (Engineering Services) has four size
standards that apply to Federal contracts for different classifications
of engineering services. In addition to general Engineering Services
with a size standard of $25.5 million in average annual receipts, there
are three subindustry groups or ``exceptions'', each with a size
standard of $47 million: Exception 1--Military and Aerospace Equipment
and Military Weapons (MAEMW), Exception 2--Contracts and Subcontracts
for Engineering Services Awarded Under the National Energy Policy Act
of 1992, and Exception 3--Marine Engineering and Naval Architecture
(MENA).
SBA's recent changes to its size standards methodology that impact
calculated size standards for the exceptions include: (1) Replacing the
2019 Methodology for computing the Federal contracting factor with the
disparity ratio approach, and (2) Using standardized FPDS/SAM data to
compute the 20th percentile and 80th percentile values of industry
factors to evaluate exceptions. Table 3, above, shows the disparity
ratio thresholds and size standard adjustment amounts. Table 7, above,
shows the 20th percentile and 80th percentile values of industry
factors for receipts based exceptions.
As stated previously, the data in the 2017 Economic Census special
tabulation is limited to the 6-digit NAICS industry level; subindustry
level data to evaluate exceptions are not available. FPDS/SAM is the
primary data source to evaluate exceptions, including the current $47
million size standard for the three exceptions under NAICS 541330. The
Economic Census data for NAICS 541330 are aggregates of both general
engineering services and specialized engineering services that fall
under the three exceptions. Thus, the results based on the Economic
Census data for NAICS 541330 may not accurately reflect the
characteristics of businesses providing specialized services included
under those exceptions. The lack of relevant data at the subindustry
level makes it challenging to determine whether the current $47 million
size standard for the three exceptions should be revised or left
unchanged.
[[Page 41224]]
To determine whether the Agency should consider revising the
current $47 million size standard for three exceptions under NAICS
541330, SBA evaluated the FY 2021-2023 data from FPDS/SAM using a two-
step procedure. First, using FPDS, SBA identified Product and Service
Codes (PSCs) that correspond to the MAEMW and MENA exceptions. SBA then
identified firms that have received Federal contracts under those PSCs
and evaluated their size data from FPDS/SAM to derive the values of
industry and Federal contracting factors for evaluating those
exceptions.
Using the FPDS data for fiscal years 2021-2023, SBA identified 91
PSCs that correspond to the MAEMW exception. A total of 304 unique
firms were found to have received contracts under those 91 PSCs. SBA
analyzed the size and contracting data of these firms to derive the
industry and Federal contracting factors for the MAEMW exception. As
shown in Table 13, below, the results supported a $41 million size
standard for the MAEMW exception, as compared to the current $47
million size standard.
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BILLING CODE 8026-09-C
Of the 304 firms that received Federal contracts for engineering
services under the MAEMW exception, 245 or 80.6 percent were classified
as small under the current $47 million size standard. The calculated
$41 million size standard would classify 243 firms, or 79.9 percent, as
``small''. Thus, if SBA were to adopt a lower $41 million calculated
size standard for the MAEMW exception, it would cause only two
currently small MAEMW firms, or 0.7 percent, to lose their small
business status. Those two firms received about $63.2 million in annual
small business contract dollars during fiscal years 2021-2023,
accounting for less than 1 percent of total contract dollars that were
awarded to all firms under the MAEMW exception. Causing those firms to
lose their small business status would put about 286 engineering jobs
at risk. Such a proposal would also run counter to SBA's proposed
policy of not lowering size standards, except for excluding dominant
firms from qualifying as small.
Similarly, SBA identified 42 PSCs that correspond to the scope of
work under the MENA exception, covering a total of 129 unique firms.
SBA analyzed the size and contracting data of these firms to derive the
industry and Federal contracting factors for the MENA exception. As
shown in Table 13, above, the results supported a $26 million size
standard for the MENA exception.
Of the 129 firms that received Federal contracts for engineering
services under the MENA exception, 108 or 83.7 percent were classified
as small under the current $47 million size standard. The calculated
$26 million size standard would classify 98 firms, or 76.0 percent, as
``small''. Thus, if SBA were to adopt a lower $26 million calculated
size standard for the MENA exception, it would cause 10 currently small
MENA firms, or 7.8 percent, to lose their small business status. Those
10 firms received about $301.7 million in annual small business
contract dollars, accounting for more than 4.6 percent of total
contract dollars that were awarded to all firms under the MENA
exception. Causing those firms to lose their small business status
would put about 1,365 engineering jobs at risk. As stated above with
respect to decreasing the size standard for the MAEMW exception, such a
proposal would also run counter to SBA's proposed policy of not
lowering size standards, except for excluding dominant firms from
qualifying as small.
As shown in Table 5, above, the results support a $29 million size
standard for the general NAICS 541330 engineering industry. Thus, with
a $41 million calculated size standard for the MAEMW exception and a
$26 million calculated size standard for the MENA exception, the
results continue to support maintaining MAEMW, but not MENA as separate
exception categories under NAICS 541330 with a higher size standard.
Moreover, although the analytical results suggest decreases from the
current $47 million to the calculated $41 million for the MAEMW
exception and to $26 million for the MENA
[[Page 41225]]
exception, consistent with SBA's policy of not lowering any size
standards, SBA proposes to maintain the current $47 million size
standard for both exceptions.
The FPDS showed very few actions involving Contracts and
Subcontracts for Engineering Services Awarded Under the National Energy
Policy Act of 1992. However, section 3021 of the National Energy Policy
Act of 1992 provides that for purposes of contracts and sub-contracts
requiring engineering services, the applicable size standard shall be
that established for military and aerospace equipment and military
weapons (106 Stat. 2776; Pub. L. 102-486 (October 24, 1992)).
Accordingly, SBA also proposes to retain the same $47 million receipts
based size standard for the exception that applies to Contracts and
Subcontracts for Engineering Services Awarded Under the National Energy
Policy Act of 1992.
Definitions of Engineering Services Exceptions
Based on its review of PSCs designated under NAICS 541330, using
FPDS/SAM information, SBA found imprecise use of PSCs by agencies in
applying the MAEMW and MENA exceptions to engineering contracts. For
example, agencies have applied certain PSCs (e.g., R425--Support-
Professional: Engineering/Technical) that seem to pertain to general
engineering services as opposed to specialized engineering services
under those exceptions. SBA attributes this imprecision in PSC
selection by agencies to the lack of definitions of these exceptions.
Accordingly, based on reviews of pertinent SBA Office of Hearings of
Appeal (OHA) NAICS code appeal cases, the NAICS 541330 industry
definition, descriptions of PSCs, and descriptions of contracts that
clearly pertain to the exceptions, SBA is proposing to include the
following definitions for engineering services exceptions to its table
of size standards in 13 CFR 121.201 as Footnotes 19 and seeking comment
on whether the proposed definitions are appropriate.
19. NAICS code 541330--(a) ``Engineering Services'' means applying
physical laws and principles of engineering in the design, development,
and utilization of machines, materials, instruments, structures,
processes, and systems. These may involve any of the following
activities: provision of advice, preparation of feasibility studies,
preparation of preliminary and final plans and designs, provision of
technical services during the construction or installation phase,
inspection and evaluation of engineering projects, and related
services.
(b) Exception 1--Military Equipment, Aerospace Equipment, and
Military Weapons:
This exception applies when agencies procure highly specialized
engineering services that are specifically and directly related to
military and aerospace platforms, systems, and technologies. This
includes work on military equipment, such as tanks, armored vehicles,
drones, missile systems, C4ISR systems, radar and sonar systems, and
other tactical or ground-based technologies. It also includes aerospace
systems, such as satellites, launch vehicles, spacecraft, navigation
and propulsion systems, and defense-related aeronautical engineering.
Additionally, the exception covers military weapons and weapon systems,
including guns, torpedoes, ballistic missile defense, nuclear weapons
systems, and emerging technologies like directed energy weapons (e.g.,
lasers). Associated specialized services, such as systems integration,
sustainment engineering, testing and evaluation, tech refreshes, and
modeling/simulation designed for military or aerospace purposes also
qualify. This exception is not limited to military contracts; it can
also apply to civilian agencies or commercial efforts that involve
defense-related equipment or applications. However, it excludes
standard civil and commercial engineering services (e.g., roads,
bridges, utilities, and facilities), and non-defense aerospace
projects.
(c) Exception 2--Contracts and Subcontracts for Engineering
Services Awarded Under the National Energy Policy Act of 1992: This
exception applies to contracts and subcontracts for engineering
services, as defined in (a) above, awarded under the National Energy
Policy Act of 1992 (NEPA). Section 3021 of NEPA provides that for
purposes of contracts and sub-contracts requiring engineering services,
the applicable size standard shall be that established for military and
aerospace equipment and military weapons (106 Stat. 2776; Pub. L. 102-
486 (October 24, 1992)).
(d) Exception 3--Marine Engineering and Naval Architecture under
NAICS 541330: This exception applies when work involves highly
specialized engineering services that are specifically and directly
related to marine vessels and naval systems. Covered areas include ship
and vessel design, such as Navy ships, submarines, Coast Guard cutters,
commercial or military cargo vessels, and special-purpose vessels like
icebreakers and autonomous ships. It also includes marine engineering,
such as propulsion and steering systems, HVAC, electrical, fuel,
ballast, and onboard fluid handling systems, as well as the integration
of weapons systems and onboard system modeling. Naval architectural
services, such as hull form development, hydrodynamic performance,
buoyancy and stability analysis, weight distribution, seakeeping, and
propulsion system design are also included. Also covered are support
services, such as ship modification, modernization, damage control,
survivability engineering, sea trials instrumentation, and assistance
with regulatory certifications. Excluded from this exception are
general civil marine structures (e.g., docks, piers, canals),
environmental engineering not related to ships, and architectural
services for shipyards or administrative buildings.
Exception to NAICS 611519: Job Corps Centers
The current size standard for Federal contracts for Job Corps
Centers (``exception'' to NAICS 611519, Other Technical and Trade
Schools) is $47 million in average annual receipts. This size standard
applies to Federal contracts that meet specific criteria. The criteria
required of a Job Corps Center contract or SBA-recognized operator are
detailed in Footnote 16 to SBA's table of size standards (13 CFR
121.201), which reads: ``For classifying a Federal procurement, the
purpose of the solicitation must be for the management and operation of
a U.S. Department of Labor Job Corps Center. The activities involved
include admissions activities, life skills training, educational
activities, comprehensive career preparation activities, career
development activities, career transition activities, as well as the
management and support functions and services needed to operate and
maintain the facility. For SBA assistance as a small business concern,
other than for Federal Government procurements, a concern must be
primarily engaged in providing the services to operate and maintain
Federal Job Corps Centers.''
[[Page 41226]]
As noted previously, the data from the 2017 Economic Census special
tabulation are limited to the 6-digit NAICS industry level and hence do
not provide data to assess economic characteristics at the subindustry
level. For example, the Economic Census data for NAICS 611519 are
aggregates of both Other Technical and Trade Schools and the more
specialized establishments under the Job Corps Centers (JCC) exception.
Thus, the results based on the Economic Census data alone may not
accurately reflect the characteristics of businesses providing
specialized services included under the exception. The lack of relevant
data at the subindustry level is a challenge to determining whether the
size standard for the JCC exception should be revised or left
unchanged.
To determine whether the Agency should propose revising the size
standard for the JCC exception under NAICS 611519, SBA analyzed data
from the U.S. Department of Labor (DOL) website which includes a list
of Job Corps Centers and their respective operators (available at
https://www.dol.gov/agencies/eta/jobcorps/contact). SBA found a total
of 24 unique entities (including two government-owned entities and one
joint venture) listed on the DOL website that support the operations of
about 120 Job Corps Centers around the country. SBA evaluated the data
from FPDS and SAM to obtain size information of those 21 non-
governmental operators. Two governmental entities and a joint venture
were excluded from the analysis. From FPDS, SBA first identified firms
that have a principal NAICS code of 611519. SBA then identified Product
and Service Codes (PSCs) that correspond to the JCC exception by
filtering the data for contracts awarded to private firms providing job
corps services. SBA identified five PSCs from this search, namely:
M1CZ--Operation of Other Educational Buildings, U006--Education/
Training--Vocational/Technical, M139--Operation of Govt Other
Educational Buildings, U099--Education/Training--Other, and U009--
Education/Training--General. Using this method, SBA identified 219
unique firms that had a principal NAICS code of 611519 (including the
21 non-governmental JCC operators found on the DOL website) and were
active in Federal contracting involving the above identified PSCs. For
fiscal years 2021-2023, the total annual average contract dollars
obligated to all PSCs under NAICS 611519 was $1,476.3 million. The
total annual average contract dollars obligated under the above five
PSCs was $1,437.9 million, which represents 97.4 percent of the total
dollars obligated to NAICS 611519 during fiscal years 2021-2023. Among
the five PSCs, M1CZ, alone, accounted for 80.1 percent of total dollars
obligated to all PSCs under NAICS 611519.
The results from SBA's analysis are presented in Table 12, Size
Standards Supported by Each Factor for Job Corps Centers Exception to
NAICS 611519 ($ Million), below. The results support decreasing the
current size standard for the JCC exception to $36 million. However,
for reasons discussed below in the ``Justification for Not Decreasing
Size Standards'' section of this proposed rule, below, SBA proposes to
retain the current $47 million receipts base size standard for the JCC
exception and seeks comment, along with supporting information, on
whether the SBA's proposal is appropriate or the Agency should adopt
the calculated size standard of $36 million.
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[[Page 41227]]
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Evaluation of Size Standard for NAICS 491110, Postal Service
NAICS 491110 is one of a few industries that are not covered by
both Economic Census and County Business Patterns Reports. Because of
the lack of industry data to review the industry structure, SBA is
proposing to leave the size standard for NAICS 491110 at the current
level of $9 million in average annual revenue. However, one of the
disparity ratios (Disparity Ratio--Method 1) supported a $14.5 million
size standard. SBA invites comments on this proposal as well as
suggestions, along with supporting information, if the $14.5 million or
a different size standard would be more appropriate.
Evaluation of Size Standards for NAICS Subsector 525, Funds, Trusts and
Other Financial Vehicles
NAICS Subsector 525 includes six 6-digit codes. Of those six, the
2017 Economic Census special tabulation includes data only for two
NAICS codes within NAICS Subsector 525: NAICS 525910, Open-End
Investment Funds, and NAICS 525990, Other Financial Vehicles, for which
calculated receipts based size standards are, as shown in Table 5
(above), $36.5 million and $31.5 million, respectively. For NAICS
525120, Health and Welfare Funds, the Federal contracting factor
(Disparity ratio--Method 1), supports a receipts based size standard of
$47 million. All industries in that Subsector currently share the same
$40 million receipts based size standard. In the previous reviews, SBA
applied the results for NAICS 525910 and 525990, specifically the
largest size standard between the two industries (i.e., $36.5 million),
to all remaining industries within Subsector 525. However, doing so
with the current results would mean decreases to size standards for all
industries in that Subsector, which would run counter to SBA's proposed
policy of not decreasing any size standards, even though the data
suggests some size standards might be decreased. Thus, for SBA's
reasons for not decreasing size standards as discussed elsewhere in
this proposed rule, the Agency is proposing to maintain the size
standards for those industries at their current $40 million level. SBA
seeks comments on this proposal as well as suggestion on alternative
data sources, if any, to evaluate size standards for those industries.
Evaluation of the Assets Based Size Standards
In 1984, SBA published a Federal Register notice allowing financial
services that prime contractors procure from small minority owned and
controlled financial institutions to qualify as subcontracts for
purposes of meeting subcontracting goals and credits (49 FR 13091,
April 2, 1984). Concurrently, SBA also published a proposed rule that a
financial institution with total assets of not more than $100 million
would be considered small (49 FR 13052, April 2, 1984). SBA adopted the
$100 million in total assets as the size standard for financial
institutions (49 FR 49398, October 16, 1984). Over time, the definition
of small depository institutions was extended to all financial
institutions within NAICS Industry Group 5221, Depository Credit
Intermediation. Since then, along with other monetary based size
standards, SBA periodically adjusted the assets based size standard for
inflation, reaching $175 million with the 2008 inflation adjustment (73
FR 41237, July 18, 2008). As part of the first five-year review of size
standards under the Jobs Act, in 2013, SBA increased the financial
institutions' size standard to $500 million in assets (78 FR 37409,
June 20, 2013), which was subsequently increased to $550 million as
part of the 2014 adjustment for inflation (79 FR 33647, June 12, 2014).
It was further increased to $600 million with inflation adjustment in
2019 (84 FR 34261, July 18, 2019), to $750 million as part of the
second five-year review of size standards under the Jobs Act (87 FR
18627, March 31, 2022), and finally to $850 million with the latest
inflation adjustment in 2022 (87 FR 69118, November 17, 2022).
Currently, the $850 million assets based size standard applies to
three industries within NAICS Industry Group 5221 (Depository Credit
Intermediation) and one industry within NAICS Industry Group 5222
(Nondepository Credit Intermediation). These include NAICS 522110
(Commercial Banking), NAICS 522130 (Credit Unions), NAICS 522180
(Savings Institutions and Other Depository Credit Intermediation), and
NAICS 522210 (Credit Card Issuing).
Because only a small number of industries have assets based size
standards, no 20th percentile and 80th percentile values of industry
factors could be developed to assess differing characteristics of
individual industries based on total assets. Thus, most of the SBA's
current size standards methodology is not applicable to analyzing the
assets based size standards for financial institutions. Consequently,
in this proposed rule, SBA examined the changes since 2018 (the latest
year for which the financial
[[Page 41228]]
institution data were available when the assets based size standard was
reviewed as part of the second five-year review of size standards under
the Jobs Act) in financial industry factors and small business assets
shares to assess whether the current $850 million assets based size
standard is adequate or should it be modified to reflect today's
financial industry structure. Specifically, for industry factors, SBA
evaluated changes from 2018 to 2023 (the latest year for which the
financial institution data are available) in average firm size,
industry concentration, and distribution of firms by size (i.e., Gini
coefficient) for financial institutions. SBA also examined the changes
in shares of total assets held by small businesses between 2018 and
2023. As in the first and second five-year reviews of size standards
under the Jobs Act, in this proposed rule as part of the current third
five-year review of size standards, SBA both evaluated all depository
institutions as a whole and the minority owned and controlled
depository institutions separately.
Depository Institutions
SBA evaluated all depository institutions using the Statistics on
Depository Institutions (SDI) data from the Federal Deposit Insurance
Corporation (FDIC). The SDI data does not provide the NAICS definition
for every firm included in the database. However, it has a field called
Asset Concentration Hierarchy, which can be used to identify each
institution's primary specialization in terms of asset concentration,
such as credit card services. Another field, Bank Charter Class,
identifies the institutions as banks or thrifts. SDI does not include
data on Credit Unions (NAICS 522130). Because the data are not
separated by NAICS code, and the differences among services offered by
different financial institutions (such as commercial banks, saving
institutions, and credit card issuing companies) have greatly
diminished over the recent decades, SBA has analyzed these financial
institutions as one industry group.
The number of all depository institutions, total assets and
calculated industry factors for 2018 and 2023 are shown on Table 13,
Calculated Industry Factors for Depository Institutions. All data were
collected at the end of the corresponding calendar year. For
comparability, all monetary values are expressed in 2023 dollars, using
the Bureau of Economic Analysis (BEA) GDP price index.
[GRAPHIC] [TIFF OMITTED] TP22AU25.048
During the 2018 to 2023 period, as shown on Table 13, the financial
industry continued to show a decrease in the total number of depository
institutions. The total number of depository institutions decreased by
15.1 percent from 5,415 in 2018 to 4,596 in 2023, while their average
firm size (measured in total assets in 2023 dollars) increased by 10.2
percent. The simple average firm size increased by a factor of about
1.3, while the weighted average firm size increased by a factor of
about 1.2. On the other hand, the four largest institutions' share of
total assets (also referred to as four-firm concentration ratio or CR4)
decreased slightly (from 39.4% to 39.3%), and the Gini coefficient
value decreased slightly from 0.818 in 2018 to 0.817 in 2023. Overall,
the changes in values of these factors suggest a size standard of $840
million,\10\ a slight reduction from current size standard of $850
million for the depository institutions. On the other hand, the share
of small businesses in 2018 under the size standard of $750 million was
78.1 percent in terms of the number of institutions, and of 4.8 percent
in terms of their assets; while for 2023, the respective shares under
the current size standard of $850 million were 74.5 percent and 4.1
percent. To increase the 2023 share of small businesses assets to the
same level of 2018, the size standard should be increased to about $1
billion in assets. Averaging both results, one based on industry
factors and the other based on the small business assets shares, the
suggested size standard would be about $920 million for the Depository
Institutions.
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\10\ Getting the average of percentage changes for each of the
four factors (i.e., simple average, weighted average, CR4 and Gini
coefficient) between 2018 and 2023 in Table 13 and applying it to
the $750 million size standard, we reached the value of $840
million. The financial industry data for 2018 supported a size
standard of $750 million that SBA adopted as part of the second
five-year review of size standard in April 2022 (87 FR 18627, March
31, 2022) which was increased to $850 million by inflation
adjustment in December 2022 (87 FR 69118, November 17, 2022).
---------------------------------------------------------------------------
NAICS 522130, Credit Unions
A credit union is a cooperative, not-for-profit financial
institution owned and controlled by its members. Credit unions are
established and operated for the purpose of promoting thrift and
providing credit at competitive rates and other financial services to
their membership. Generally, they could be corporate credit unions,
Federal, or State credit unions. Because this industry includes only
not-for-profit institutions, SBA does not consider them small business
concerns for Federal government assistance. The small business
regulations state that a business concern eligible for assistance from
SBA as a small business is a business entity organized for profit, with
a place of business located in the United States (see 13 CFR
121.05(a)(1)). However, SBA has established a size standard for this
industry because it is useful for other purposes, such as
[[Page 41229]]
rulemaking. Table 15, Calculated Industry Factors for Credit Unions,
below, provides the calculated factors for Credit Unions. Between 2018
and 2023, the total number of concerns diminished by 14.4 percent, but
at the same time the total assets increased by 29.5 percent. The simple
average increased by 51.2 percent between 2018 and 2023 in real terms,
and the weighted average grew by 54.3 percent. The four-firm
concentration ratio increased by a factor of 1.04. Gini coefficient did
not change much during the period. Changes in these factors would
support an increase of size standard for Credit Unions from $850
million to $960 million in assets.\11\ Moreover, in 2018 the share of
total Credit Unions assets held by small businesses under the $750
million size standard (which SBA adopted as part of the second five-
year review of size standards) were 26.4 percent, and that in 2023 this
ratio diminished to 21.3 percent under the current $850 million size
standard. In order to increase this ratio to the 2018 level, the size
standard would need to be increased to about $940 million. Averaging
both results, one based on industry factors and the other based on the
small business assets shares, the suggested size standard for Credit
Unions would be about $950 million.
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\11\ Getting the average of percentage changes for each factor
(i.e., simple average, weighted average. CR4, and Gini Coefficient
between 2018 and 2023 from Table 15 and applying it to the inflation
preadjusted size standard (i.e. $750 million), we reached the value
of $960 million. The financial industry data for 2018 supported a
size standard of $750 million, which was increased to $850 million
by inflation adjustment in December 2022.
[GRAPHIC] [TIFF OMITTED] TP22AU25.049
Federal Contracting Factor
For the four assets based industries listed above, Federal
contracting dollars averaged about $164 million per year during fiscal
years 2021-2023. This reflects a large increase in dollars awarded to
those industries as compared to fiscal years 2016-2018, when the
average total dollars obligated to them was about $130 million. Of
those four industries, NAICS 522110, Commercial Banking, accounts for
99.0 percent of the average total dollars obligated during fiscal years
2021-2023. Thus, under the SBA's Revised Methodology, Federal
contracting is a significant factor for reviewing the assets based size
standard for the financial industries. The data yields the disparity
ratios of 0.23 under Method 1 and 17.78 under Method 2. The disparity
ratio under Method 1 would support a size standard of $1,063 million
(i.e., increasing the current $850 million size standard by 25% as per
Table 3 (above)) and disparity ratio under Method 2 would support the
current $850 million. The average of the two values equals to $956
million, which is the size standard supported by Federal contracting
factor.
Summary of Calculated Size Standards for Depository Institutions and
Credit Unions
Based on the analyses of industry factors and differences of the
shares of small businesses in total assets between 2018 and 2023, the
calculated size standard for depository institutions is $918 million in
assets, which would apply to the following three industries within
NAICS Subsector 522, Credit Intermediation and Related Activities:
NAICS 522110 (Commercial Banking), NAICS 522180 (Savings Institutions
and Other depository Credit Intermediation), and NAICS 522210 (Credit
Card Issuing). Based on the similar results, the calculated size
standard for NAICS 522130 (Credit Unions) is $948 million in assets.
The weighted average of the calculated size standards for depository
institutions and credit unions is $921 million. These results are shown
in Table 15, Summary of Calculated Size Standards for Depository
Institutions and Credit Unions, below.
As discussed above, Federal contracting factor (i.e., disparity
ratio analysis) supports a size standard of $956 million and industry
factors support a size standard of $921 million. In calculating the
overall industry size standard, the SBA's methodology assigns a weight
of 0.8 to four industry factors combined and a weight of 0.20 to the
Federal contracting factor. The weighted average of the two calculated
size standards using these weights gives an overall size standard of
$928 million (i.e., (0.8 * 921) + (0.2 * 956) = 928), which is rounded
to $925 million.
Accordingly, consistent with its historical practice of maintaining
the same size standard for all financial industries, SBA is proposing
to increase the size standard for all four financial industries from
the current $850 million to $925 million in assets. If adopted, the
proposed size standard would apply to the following industries: NAICS
522110 (Commercial Banking), NAICS 522180 (Savings Institutions and
Other depository Credit Intermediation), NAICS 522210 (Credit Card
Issuing), and NAICS 522130 (Credit Unions). SBA is seeking comment on
whether SBA should consider establishing separate size standards for
each of the four industries or continue using a common size standard.
[[Page 41230]]
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Summary of Calculated Size Standards
Of 500 industries and thirteen (13) subindustries (``exceptions'')
reviewed in this proposed rule, the results from analyses of the latest
available data on the five primary factors from Table 5 (above), along
with similar results for various exceptions and assets based size
standards in subsequent tables, would support increasing size standards
for 263 industries (259 receipts based and four assets based) and
decreasing size standards for 203 industries and nine (9) subindustries
or exceptions. The results supported retaining current size standards
for 38 receipts-based industries. Table 16, Summary of Calculated Size
Standards, summarizes these results by NAICS sector.
[[Page 41231]]
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Evaluation of SBA Loan Data
Before proposing or deciding on an industry's size standard
revision, SBA also considers the impact of size standards revisions on
SBA's loan programs. Accordingly, SBA examined its internal 7(a) and
504 loan data for fiscal years 2021-2023 to assess whether the
calculated size standards in Table 5 (above) need further adjustments
to ensure credit opportunities for small businesses through those
programs. For the industries reviewed in this rule, the data shows that
it is mostly businesses much smaller than the current or proposed size
standards that receive SBA's 7(a) and 504 loans. For example, for
industries covered by this rule, 98.0 percent of 7(a) and 504 loans in
fiscal years 2021-2023 went to businesses at or below the current or
calculated size standards. The data suggests that no calculated size
standards need further adjustments based on evaluation of the loan
data.
Justification for Not Decreasing Size Standards
Decreasing size standards would cause many businesses that are
small under the current size standards, especially those that are
larger, more experienced and capable small businesses just below the
current size standards, to lose their small business status and
eligibility for Federal small business assistance. SBA believes that
decreasing size standards under the current economic environment could
stifle the ongoing economic growth following the COVID-19 pandemic by
causing many currently qualified and capable small firms to become
ineligible for SBA's financial assistance and Federal contracting
programs. SBA is meeting the continued need for increased SBA's support
for small businesses to support ongoing economic growth and job
creation by not decreasing size standards, even though analytical
results suggest that some size standards might be decreased.
[[Page 41232]]
As discussed below in greater detail, reducing the number of small
businesses may lead to fewer set-aside opportunities for small
businesses overall as it would reduce the pool of eligible qualified
firms that the Federal Government could select from when setting aside
procurements for small businesses. SBA believes that decreasing size
standards would run counter to its mission to aid, counsel, assist and
protect the interests of small business concerns, preserve free
competitive enterprise, and maintain and strengthen the overall economy
of our Nation. For these and other reasons, discussed below in a
greater detail, SBA believes that it has the discretion to propose a
policy of not decreasing any size standards because the only
Congressionally mandated requirement is that SBA exclude dominant firms
from qualifying small, even though the data suggests some size
standards might be decreased.
As discussed below, decreasing small business size standards, which
would lower the threshold for what qualifies as a small business, could
have negative impacts on many aspects of the economy, including
Government contracting, subcontracting and supply chains, access to
capital, competition and industry consolidation, innovation and
entrepreneurship, job creation, economic growth, defense industrial
base and national security, and small business industrial base.
Government Contracting: Decreasing small business size standards
can have a significant impact on Government contracting, particularly
in terms of access, competition, contract fulfillment, and the Federal
Government's ability to meet its Congressionally mandated small
business procurement goals. Businesses that no longer qualify as small
may lose preference and access to Federal set-aside contracts, thereby
forcing them to compete with large companies with significantly more
resources and extensive qualifications for contracting opportunities.
Businesses that would lose small business status, were the size
standards reduced according to analytical results, based on the
procurement data for fiscal years 2021-2023, would lose more than $2
billion annually in Federal contracts for small businesses. Larger
small companies that lose access to small business set-aside contracts
and will be forced to compete with large corporations may face
difficulties securing Government contracts under full and open
competition. This can reduce their revenue streams from Government
contracts and limit their ability to grow and create jobs, with
potentially far-reaching implications in the broader economy. The
exclusion of larger small firms from the small business category may
reduce the overall pool of companies available to compete for Federal
contracts, thereby limiting the number of qualified suppliers in some
industries, particularly those that are highly dependent on Government
contracts, such as defense, construction, and IT services. This could
lead to fewer competitive bids, especially for contracts requiring
specialized skills or capabilities that smaller small businesses may
not possess, potentially driving up costs to consumers and Government
agencies, especially in industries where larger small businesses are
key players. Losing small business status and associated advantage
could make it harder for these firms to participate in large projects,
especially in industries like construction, technology, and defense. As
stated previously, larger small businesses that lose their small
business status will no longer qualify for certain set-aside contracts,
which may lead to a shift in contract awards from these firms to
smaller small businesses. However, smaller small businesses may lack
the necessary resources, qualifications, or capacity to handle larger
or more complex Government projects. If too many larger small firms
lose access to small business set-asides, the pool of contractors
capable of fulfilling high-value or technically demanding contracts may
shrink, potentially leading to delays or lower-quality work in certain
sectors, such as defense, construction, and IT, where performance and
scale are critical. With fewer businesses qualifying as small, the
Government may have to work harder to find qualified contractors
capable of fulfilling certain requirements. This could complicate the
process of meeting Government's small business procurement goals,
particularly for larger or more complex projects.
Subcontracting and Supply Chains: Businesses that lose their small
business status may struggle to secure subcontracting work from large
companies, as prime contractors may prefer to work with businesses that
still qualify as small to meet their small business subcontracting
goals. This could reduce the number of viable small business
subcontractors for large Government contracts, potentially affecting
the overall supply chain and project execution. With fewer businesses
qualifying as small, large prime contractors will face difficulties
meeting their small business subcontracting goals.
Access to Capital and Other Benefits: Businesses that lose their
small business status could face difficulties accessing capital through
SBA-backed loans and benefits from other support programs, potentially
slowing their growth. They may struggle to secure favorable loans and
financing options, especially if they have relied on SBA-backed loan
programs in the past. Without SBA loans, or loan guarantees, they might
struggle to invest in growth, equipment, technology, or workforce
development. This could result in a slowdown in expansion and economic
activity for these businesses. As firms that lose their small business
status may no longer be eligible for SBA-backed loans or other forms of
small business financing, these firms might be forced to turn to more
expensive financing options. Businesses losing small business status
would also lose other benefits such as lower taxes and exemptions from
certain compliance and paperwork requirements.
Competition and Industry Consolidation: Businesses that lose their
small business status may now be forced to compete directly against
larger corporations for unrestricted Government contracts, which could
put them at a significant competitive disadvantage. Some of these
companies will struggle to survive or even be forced to merge with
larger corporations or exit the market altogether, contributing to
increased industry consolidation and reduced competition and market
diversity. The loss of small business status for many small businesses
could lead to increased mergers and acquisitions as these businesses
seek ways to survive and remain competitive. This could result in
reduction in the number of independent businesses in key sectors of the
economy, such as manufacturing, construction and IT, leading to less
innovation, greater industry consolidation, reducing diversity and
consumer choices in the marketplace, and potentially leading to
monopolistic practices in some sectors dominated by large players. This
would run counter to Executive Order 14267 (90 FR 15629, April 9,
2025), which directs Federal agencies to reduce anticompetitive
regulatory Barriers.
Job Creation and Employment: Small businesses are significant job
creators, accounting for two-thirds of total new job creation in the
U.S. and nearly half of the private sector workforce. Larger small
businesses that lose their small business status might be forced to
reduce hiring, downsize, or even lay off
[[Page 41233]]
employees as they lose access to revenue streams from Government
contracts and SBA's loans that helped them start and expand. Larger
small firms could become less willing to hire from smaller
subcontractors, reducing opportunities for growth and employment. Job
losses could occur in industries where small businesses are a
significant part of the overall labor market. As stated earlier,
decreasing size standards for 213 industries/subindustries, solely
based on analytical results, would force about 7,900 businesses to lose
their small business designation in industries covered by this proposed
rule. These businesses are estimated to support about 604,850
employees, which would be at risk of being laid off if they lose their
small business status and associated benefits, in particular access to
Government contracts and SBA financial assistance intended for small
businesses.
Economic Growth: According to SBA's Office of Advocacy, small
businesses contribute approximately 44 percent of the U.S. gross
domestic product (GDP). Companies on the higher end of the size
spectrum, which might lose their small business status because of
decreases to size standards, could face financial challenges, stalling
their growth and possibly impacting broader economic activity.
Businesses that lose their small business status may struggle to
compete with large corporations with significantly more resources and
capabilities and could face slower growth, stagnation, or even
downsizing. This may particularly affect firms in industries, such as
manufacturing, construction, and IT, where larger small firms often
play a crucial role. If small businesses are forced to downsize or shut
down due to the loss of small business status, it could negatively
affect local economies that rely on these companies for jobs, taxes,
and local commerce. In regions where small businesses are a major
source of employment, this could lead to higher unemployment, economic
stagnation or decline. If a significant number of small businesses lose
access to Government contracts, capital, and other resources intended
for small businesses, it could result in slower growth, fewer
investments, and reduced job creation. These firms often serve as
critical growth engines in the economy, and their struggle to adapt
could have a ripple effect on sectors that rely on a healthy and
competitive small business ecosystem.
Innovation and Entrepreneurship: Larger small businesses which
often have the resources to invest in research and development (R&D)
may lose their small business status and access to Government contracts
and SBA programs. This will slow growth of these companies and the
Government will miss out on cutting-edge technologies and approaches
that these firms can provide. This could result in a reduction of their
R&D investments and innovation efforts, limiting innovation in key
economic sectors, including technology, and engineering, and other
high-growth industries. This could stifle competition in high-tech
industries where mid-sized and larger small firms are often the most
innovative. This could lead to a slowdown in innovation, potentially
weakening the overall competitiveness of the economy.
Defense Industrial Base and National Security: According to the
Department of Defense (DoD), small businesses make up 73 percent
companies in the U.S. defense industrial base (https://www.defense.gov/News/Releases/Release/Article/3279279/). In 2024, small business
vendors accounted for 79 percent of total DoD vendor count. In 2023,
small businesses accounted for 25.2 percent of all DoD prime contracts,
amounting to $92 billion. The DoD's total small business vendor count
decreased 49 percent between 2010 and 2024. A reduction in SBA size
standards would disqualify firms that currently qualify as small for
DoD contracts, thereby shrinking the pool of eligible and qualified
defense contractors and exacerbating the ongoing contraction of the DoD
small business vendor base. This could lead to fewer options for DoD,
especially for contracts that require specialized skills and
capabilities offered by larger and more qualified small firms. Larger
small businesses that lose their small business status may no longer be
viable defense suppliers and may not be able to compete against much
larger defense contractors with significantly more resources and
extensive qualifications and experiences. This could limit the number
of companies that can deliver on certain high-value or specialized
contracts, especially in areas like defense technology, manufacturing,
and cybersecurity. This could weaken the defense supply chain, as fewer
firms would be able to meet the stringent requirements of the DoD,
especially for specialized or high-tech products and services. As
stated earlier, many larger small firms that invest heavily in R&D
would lose access to defense contracts, thereby reducing overall
investment in defense-related R&D, stifling innovation in critical
areas such as advanced weapons systems, communications, and logistics.
If larger small businesses lose their small business status, the
defense industrial base could lose a segment of highly capable,
strategically important firms. This could limit the DoD's access to
critical technologies and reduce the overall competitiveness of U.S.
defense capabilities. Decreasing size standards might reduce the number
of capable defense suppliers, as larger small businesses lose their
status and may be unable to compete with large prime contractors,
thereby reducing competition, increasing costs, and reducing
innovation. Companies that lose small business status might be forced
to reduce their workforce, consolidate, or even close. This could
result in job losses, particularly in industries and regions where the
defense sector plays a significant role in the local economy. Firms
that lose small business status may struggle to secure subcontracts
from large prime contractors. This could impact the lower tiers of the
defense supply chain, where specialized larger small firms are often
critical subcontractors for large defense projects. Reducing the number
of eligible contractors by lowering size standards could lead to a
consolidation of the industrial base, concentrating power in the hands
of a few large firms and reducing the flexibility, resilience, and
diversity that are critical to long-term health of the defense
industrial base.
Small Business Industrial Base: Decreasing small business size
standards can have wide-ranging impacts on the small business
industrial base, which includes the businesses that support Government
projects and health of various key industrial sectors, including
professional services, manufacturing, and construction.
Total small business vendor count in the Federal market decreased
49 percent from 119,341 in 2010 to 60,952 in 2024. The share of small
business in total vendor count decreased from 80% to 73% during the
same period. Lowering small business size standards, thereby causing
about 7,900 small businesses under the current size standards to lose
their small business status, would exacerbate this trend when the
Federal Government, through various initiatives and strategies (e.g.,
strengthening small business supply chains, workforce readiness, and
simplified and flexible acquisition, etc.), is trying to reverse this
worrisome trend and strengthen the Federal small business industrial
base.
If size standards were decreased based on analytical results, many
businesses may lose their small business status, meaning they will no
longer be eligible for small business set-asides contracts,
[[Page 41234]]
grants, and other SBA programs. Without small business status, they
could also face difficulties in competing with large companies. The
loss of small business status could reduce competitiveness of larger
small businesses, especially when vying for contracts or business
opportunities with large corporations. These firms may face increased
pressure to merge or consolidate to survive, thereby reducing market
competition. Loss of small business eligibility could hurt small
business ability to stay competitive in the Federal marketplace.
Certain industries, like manufacturing and construction, where
economies of scale matter, could be negatively impacted. Larger small
companies that lose small business status may find it hard to compete
against larger, more established firms, leading to industry
consolidation or potential closures in these sectors. Decreasing size
standards may hurt the competitiveness of mid-sized firms that are
still growing but are no longer eligible for small business benefits.
These businesses may not yet be large enough to compete with major
corporations, which could lead to stagnation or a slowing of their
growth.
Evaluation of Calculated Size Standards for Dominance in Field of
Operation
As part of the review, SBA further evaluates calculated size
standards to ensure that dominant or potentially dominant firms are
excluded from qualifying as small. For this, as stated earlier, SBA
examines the industry's market share of firms at the calculated size
standard as well as the distribution of firms by size. SBA generally
considers such market share of more than 40 percent as suggesting that
a firm qualifying as small could be dominant in its industry. Among the
industries with monetary based size standards reviewed in this proposed
rule, the firm's market shares at the calculated and current size
standards exceed 40 percent for two industries, namely NAICS 485111
(Mixed Mode Transit Systems) and 812922 (One-Hour Photofinishing). For
NAICS 485111, both the current and calculated size standard is $29
million, with the firm's market share at that level being equal to 42.6
percent. To reduce that share to below the 40 percent threshold, the
size standard for NAICS 485111 should be lowered to $27 million. For
NAICS 812922, the firm's market share at the $19 million current
standard is 67.8 percent and at the $12.5 million calculated size
standard is 44.6 percent. To lower that share to below 40%, the size
standard should be decreased to $11 million. However, the evaluation of
distributions of firms by size using the Economic Census and SAM data
shows no firms between $27 million and $29 million for NAICS 485111and
between $11 million and $19 million for NAICS 812922 to exert the
dominance in both industries. Accordingly, SBA proposes to retain the
current size standards for both industries. For the remaining
industries, the firm's market share at the calculated size standards
averaged 0.8 percent, varying from a minimum of 0.004 percent to a
maximum of 21.6 percent. These levels of market shares preclude any
businesses qualifying as small under the calculated size standards from
exerting dominance in their industries.
Proposed Size Standards Changes
Based on the analytical results in Table 5 (above) and considering
impacts of calculated size standards in terms of access by currently
small businesses to SBA's loans, results from dominant analysis of
calculated size standards, and SBA's proposed policy of not decreasing
any size standards (except for excluding dominant firms from qualifying
as small) even if the analytical results support decreasing some size
standards, of a total of 513 monetary based size standards (including
nine ``exceptions'') that are reviewed in this proposed rule, SBA
proposes to increase 263 size standards, retain 249, and remove one
exception. Proposed changes to size standards for each NAICS industry
are presented in Table 17, Proposed Size Standards Changes by Industry.
Also shown in Table 17 are current and calculated size standards.
BILLING CODE 8026-09-P
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BILLING CODE 8026-09-C
Evaluation of Proposed Size Standards for Dominance in Field of
Operation
SBA has determined that for the industries which it has evaluated
in this proposed rule, no individual firm at or below the proposed size
standard would be large enough to dominate its field of operation. At
the proposed size standards levels, if adopted, the small business
share of total industry receipts among those industries (excluding
NAICS 485111 and 812922 discussed earlier) would be, on average, 0.7
percent, varying from 0.004 percent to 21.6 percent. These market
shares effectively preclude a firm at or below the proposed size
standards from exerting control on any of the industries.
Alternatives Considered
By law, SBA is required to develop numerical size standards for
establishing eligibility for Federal small business assistance programs
and to review every five years all size
[[Page 41256]]
standards and make necessary adjustments to reflect the current
industry structure and Federal market conditions. Other than varying
the levels of size standards by industry and changing the measures of
size standards (e.g., using annual receipts vs. the number of employees
\12\), no practical alternatives exist to the systems of numerical size
standards.
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\12\ This option is also quite limited because the law requires
that the size of manufacturing firms be measured in terms of the
number of employees and the size of services firms be measured in
terms of the average annual revenue.
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SBA is proposing to increase size standards where the data
suggested increases are warranted, and to retain, for reasons discussed
above, all current size standards at their current levels where the
data suggested lowering or no change might be appropriate.
Nonetheless, as in the previous review of size standards under the
Jobs Act, SBA considered two other alternatives. Alternative option one
was to propose changes exactly as suggested by the analytical results.
Alternative option two was to retain all current size standards.
By adopting the results as they are, alternative option one would
cause about 7,900 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. SBA provides a more detailed
analysis of impacts of this alternative under the regulatory impact
analysis section below.
Under alternative option two, SBA considered maintaining a status
quo, i.e., retaining all size standards at their current levels even
though the latest available data may suggest changing them. This would
prevent businesses from receiving benefits of increases to size
standards for numerous industries for which the latest data warrant
increases to their size standards. Doing nothing or maintaining the
status quo would also run counter to the statutory mandate that SBA
review all size standards every five years and make necessary
adjustments to reflect current market conditions.
Request for Comments
SBA invites public comments on this proposed rule, especially on
the following issues:
1. SBA seeks feedback on whether SBA's proposal to increase 263
monetary based size standards (259 receipts based and 4 assets based),
retain 249, and eliminate one receipts based size standard is
appropriate given the results from the latest available industry and
Federal contracting data of each industry and subindustry
(``exception'') reviewed in this proposed rule. SBA seeks suggestions,
along with supporting facts and analysis, for alternative size
standards for certain industries or a group of industries, if they
would be more appropriate than the proposed size standards.
2. SBA seeks comments on its proposed policy of not lowering any
standards even though analytical results suggest some size standards
could be lowered, except for excluding dominant firms from qualifying
as small. SBA believes that lowering size standards would run counter
to SBA's mission to aid, counsel, assist and protect small businesses,
to preserve free competitive enterprise, and to maintain and strengthen
the nation's economy.
3. In calculating the overall industry size standard, SBA has
assigned equal weight to each of the five primary factors in all
industries and subindustries covered by this proposed rule. SBA seeks
feedback on whether it should assign equal weight to each factor or on
whether it should give more weight to one or more factors for certain
industries or a group of industries. Recommendations to weigh some
factors differently than others should include suggested weights for
each factor along with supporting facts and analysis.
4. SBA seeks suggestions on data sources it used to evaluate size
standards for the Forest Fire Suppression and Fuel Management Services
subindustries (``exceptions'') within NAICS 115310 and comments on its
proposal to retain the current $34 million size standard for both
exceptions even if the analysis supported decreasing it to $20 million.
SBA is also interested in comments on the possible elimination of the
Forest Fire Suppression and Fuel Management Services as ``exceptions''
to NAICS 115310, and the application of the same general size standard
for NAICS 115310. Comments on applying the same NAICS 115310 size
standard for Forest Fire Suppression and Fuel management Services
exceptions should address why the same size standard is more suitable
than separate size standards for Forest Fire Suppression and Fuel
management Services or why firms engaged in Forest Fire Suppression and
Fuel Management Services should continue to be treated as separate
activities from the rest of NAICS 115310 for SBA's size standards
purposes.
5. SBA seeks suggestions or comments on data it used to evaluate
the size standard for the Dredging and Surface Cleanup Activities
(Dredging), a subindustry (``exception'') category within NAICS code
237990 and its proposal to retain the current $37 million size
standard, even though the data supported a lower $21.5 million size
standard. SBA is also interested in comments on eliminating the
subindustry category for Dredging and applying the same $45 million
size standard that currently applies to the overall NAICS 237990
industry. Comments on applying the same NAICS 237990 size standard for
Dredging should address the basis for why that industry size standard
is more suitable than a specific Dredging subindustry size standard or
why dredging firms should continue to be evaluated as a discrete
subindustry for SBA's size standards purposes.
Additionally, SBA seeks comments on its proposal to retain Footnote
2 in 13 CFR 121.201, which provides that ``to be considered small for
purposes of Government procurement, a firm or its similarly situated
subcontractors must perform at least 40 percent of the volume dredged
with their own equipment or equipment owned by another small dredging
concern.'' Comments pertaining to this requirement should address on:
(1) whether there continues to be a need to retain the current 40
percent equipment requirement under current industry practices; (2)
whether the 40 percent equipment requirement should be revised, and if
so, the rationale for an alternative percentage; and (3) whether a
different and more verifiable requirement based on an alternative
measure (such as value of contract or personnel involved) may achieve
the same objective of ensuring that small businesses perform
significant and meaningful work on dredging contracts set aside for
small businesses.
6. SBA seeks comment on its proposal to eliminate Non-Vessel Owning
Common Carriers and Household Good Forwarders (NVOCCHGF) as a
subindustry or ``exception'' category from NAICS 488510, Freight
Transportation Arrangement. Considering similarities in economic
characteristics between the NVOCCHGF exception and the overall NAICS
488510 industry, absence of uniquely identifiable PSCs corresponding to
the exception, and a lack of industry data to adequately evaluate the
exception industry, SBA is proposing to eliminate the NVOCCHGF
exception to NAICS 488510. Furthermore, considering very low
utilization of small businesses in Federal contracting under the
current size standard under NAICS 488510, SBA also seeks comment on its
proposal
[[Page 41257]]
to apply to the general NAICS 488510 industry a higher $34 million size
standard that currently applies to the NVOCCHGF exception.
7. Because of the lack of data to review the industry structure,
SBA is proposing to leave the size standard for Postal Service (NAICS
491110) at the current level of $9 million in average annual revenue.
SBA invites comments on this proposal as well as suggestions, along
with supporting information, if a different size standard would be more
appropriate. SBA seeks comment if it should adopt a higher $14.5
million size standard suggested by one of the two disparity ratios.
8. The 2017 Economic Census special tabulation includes data only
for two NAICS codes within NAICS Subsector 525: NAICS 525910, Open-End
Investment Funds, and NAICS 525990, Other Financial Vehicles.
Calculated receipts based size standards for those industries are, as
shown in Table 5 (above), $36.5 million and $31.5 million,
respectively. Because all industries in that Subsector 525 currently
share the same $40 million size standard, SBA applied the results based
on data for NAICS 525910 and 525990 to all remaining industries within
this Subsector. However, doing so would mean decreasing size standards
for all industries in that Subsector. Consistent with SBA's proposed
policy of not lowering any size standards, the Agency is proposing to
maintain the size standards for those industries at their current $40
million level. SBA seeks comments or suggestions along with supporting
information on the following:
a. Whether SBA should adopt a common size standard for all
industries in Subsector 525 or adopt a separate size standard for each
industry, and
b. Whether a lower common size standard would be more appropriate
for those industries and, if so, what that size standard should be.
9. SBA proposes to increase the size standard for three industries
within NAICS Industry Group 5221, Depository Credit Intermediation
(i.e., NAICS 522110, 522130, and 522180) and on industry in NAICS 5222,
Nondepository Credit Intermediation (i.e., NAICS 522210) from $850
million to $925 million in assets. SBA also proposes to maintain the
common size standard for the four industries even though the data
supported a higher standard for NAICS 522130 (Credit Unions). SBA
invites comments or suggestions, along with supporting information,
with respect to whether the Agency should adopt the common size
standard for those industries or establish a separate size standard for
each industry.
10. SBA proposes to retain Marine Engineering and Naval
Architecture as one of separate subindustry categories (``exceptions'')
to NAICS 541330 (Engineering Services) with the current $47 million
size standard, even though the data supported a lower $26 million
calculated size standard, as compared to a $29 million calculated/
proposed size standard for overall NAICS 541330. Considering these
results, SBA seeks comment on whether Marine Engineering and Naval
Architecture should be eliminated as an exception to NAICS 541330 and
subject to the same $29 million proposed size standard applicable for
the overall industry or it should be retained as an exception with a
$47 million size standard as proposed.
11. In this rule, SBA proposes detailed definitions for the three
exceptions under NAICS 541330 (Engineering Services) as Footnote 19 to
the SBA table of size standards and seeks comments on whether the
proposed definitions are appropriate. SBA invites suggested changes if
the proposed definitions are not appropriate.
12. Finally, SBA seeks comments on data sources it used to examine
industry and Federal market conditions, as well as suggestions on
relevant alternative data sources that the Agency should evaluate in
reviewing or modifying size standards for industries covered by this
proposed rule.
Public comments on the above issues are very valuable to SBA for
validating its proposed size standards revisions in this proposed rule.
Commenters addressing size standards for a specific industry or a group
of industries should include relevant data and/or other information
supporting their comments. If comments relate to the application of
size standards for Federal procurement programs, SBA suggests that
commenters provide information on the size of contracts in their
industries, the size of businesses that can undertake the contracts,
start-up costs, equipment and other asset requirements, the amount of
subcontracting, other direct and indirect costs associated with the
contracts, the use of mandatory sources of supply for products and
services, and the degree to which contractors can mark up those costs.
Compliance With Executive Orders 12866, 12988, 13132, 13563 and 14192,
the Initial Regulatory Flexibility Act (5 U.S.C. 601-612), and the
Paperwork Reduction Act (44 U.S.C. Ch. 35)
Executive Order 12866
The Office of Management and Budget (OMB) has determined that this
proposed rule is not a ``significant regulatory action'' for purposes
of Executive Order 12866. However, in the next section, SBA provides a
Cost Benefit Analysis of this proposed rule, including: (1) a statement
of the need for the proposed action, (2) an examination of alternative
approaches, and (3) an evaluation of the benefits and costs--both
quantitative and qualitative--of the proposed action and the
alternatives considered.
Cost Benefit Analysis
1. What is the need for this regulatory action?
Under the Small Business Act (Act) (15 U.S.C. 632(a)), SBA's
Administrator is responsible for establishing small business size
definitions (or ``size standards'') and ensuring that such definitions
vary from industry to industry to reflect differences among various
industries. The Jobs Act requires SBA to review every five years all
size standards and make necessary adjustments to reflect current
industry and Federal market conditions. This proposed rule is part of
the third 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 and the second five-year review in early 2023. Such periodic
reviews of size standards provide SBA with an opportunity to
incorporate ongoing changes to industry structure and Federal market
environment into size standards and to evaluate the impacts of prior
revisions to size standards on small businesses. This also provides SBA
with an opportunity to seek and incorporate public input to the size
standards review and analysis. SBA believes that proposed size
standards revisions for industries being reviewed in this rule will
make size standards more reflective of the current economic
characteristics of businesses in those industries and the latest trends
in Federal marketplace.
SBA's mission is to aid and assist small businesses through a
variety of financial, procurement, business development and counseling,
and disaster assistance programs. To determine the actual intended
beneficiaries of these programs, SBA establishes numerical size
standards by
[[Page 41258]]
industry to identify businesses that are deemed small.
The proposed revisions to the existing monetary based size
standards for 263 industries in various NAICS Sectors are consistent
with SBA's statutory mandates to help small businesses grow and create
jobs and to review and adjust size standards every five years. This
regulatory action promotes the Administration's goals and objectives as
well as meets the SBA's statutory responsibility. One of SBA's goals in
support of promoting the Administration's objectives is to help small
businesses succeed through fair and equitable access to capital and
credit, Federal Government contracts and purchases, and management and
technical assistance. Reviewing and modifying size standards, when
appropriate, ensures that intended beneficiaries 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?
Pursuant to Circular A-4 (September 17, 2003), OMB directs agencies
to establish an appropriate baseline to evaluate any benefits, costs,
or transfer impacts of regulatory actions and alternative approaches
considered. The baseline should represent the agency's best assessment
of what the world would look like absent the regulatory action. For a
new regulatory action promulgating modifications to an existing
regulation (such as modifying the existing size standards), a baseline
assuming no change to the regulation (i.e., making no changes to
current size standards) generally provides an appropriate benchmark for
evaluating benefits, costs, or transfer impacts of proposed regulatory
changes and their alternatives.
Proposed Changes to Size Standards
Based on the results from analyses of latest industry and Federal
contracting data and consideration of SBA's proposed policy of not
lowering any size standards (except for excluding dominant firms from
qualifying as small) even though the data support decreases to some
size standards, of a total of 513 industries/subindustries with
monetary based size standards (receipts and assets) that are reviewed
in this proposed rule, SBA proposes to increase size standards for 263
industries (259 receipts based and 4 assets based), and maintain
current size standards for remaining 250 industries/subindustries.
The Baseline
For purposes of this regulatory action, the baseline represents
maintaining the ``status quo,'' i.e., making no changes to the current
size standards. Using the number of small businesses and levels of
benefits (such as set aside contracts, SBA's loans, disaster
assistance, etc.) they receive under the current size standards as a
baseline, one can examine the potential benefits, costs and transfer
impacts of proposed changes to size standards on small businesses and
on the overall economy.
Based on the 2017 Economic and Agricultural Census (the latest
available), of a total of about 7.5 million businesses in industries
reviewed in this proposed rule, 98.4 percent are considered small under
the current size standards. Small businesses under current size
standards account for 30 percent of total receipts and about 45 percent
of total employment in those industries.\13\ Based on the data from
FPDS for fiscal years 2021-2023, about 37,000 unique firms in those
industries received at least one Federal contract during that period,
of which 84.7 percent were small under the current size standards. A
total of $285.2 billion in average annual contract dollars were awarded
to businesses in those industries during the period of evaluation, and
32.6 percent of the dollars awarded went to small businesses. For
industries/subindustries reviewed in this proposed rule, providing
contract dollars to small businesses through set asides is quite
important. From the total small business contract dollars awarded
during the period considered, 70.4 percent were awarded through various
small business set-aside programs and 29.6 percent were awarded through
non-set-aside contracts. Based on the SBA's internal data on its loan
programs for fiscal years 2021-2023, small businesses in those
industries received, on an annual basis, a total of approximately
52,400 7(a), 504/CDC, and micro loans in that period, totaling about
$28.7 billion in loan amount, of which 80.3 percent was issued through
the 7(a) program, 19.5 percent was issued through the 504/CDC program,
and 0.2 percent was issued through the micro loan program. During
fiscal years 2021-2023, small businesses in those industries also
received 5,150 loans through the SBA's Economic Injury Disaster Loan
(EIDL) program, totaling about $223 million in loan amount on an annual
basis. Table 19, Baseline for All Industries with Monetary Based Size
Standards, provides these results.
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\13\ These figures do not include industries that are out of
scope of the Economic and Agricultural Census, subindustries
(``exceptions''), and industries with assets based size standards.
As stated elsewhere in this rule, because the industry data in the
Economic and Agricultural Census are limited to the 6-digit industry
level, no data is available at the subindustry level.
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BILLING CODE 8026-09-P
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BILLING CODE 8026-09-C
Increases to Size Standards
As stated above, of 513 monetary based size standards (including 13
exceptions) that are reviewed in this rule, based on the results from
analyses of latest industry and Federal market data as well as impacts
of size standards changes on small businesses, in this rule, SBA
proposes to increase 263 size standards (259 receipts based and four
assets based). Below are descriptions of the benefits, costs and
transfer impacts of these proposed increases to size standards.
Benefits of Increases to Size Standards
The most significant benefit to businesses from proposed increases
to size standards is gaining eligibility for Federal small business
assistance programs or retaining that eligibility for a longer period.
These include SBA's business loan programs, EIDL program, and Federal
procurement programs intended for small businesses. Federal procurement
programs provide targeted, set-aside opportunities for small businesses
under the SBA's various contracting and business development programs.
These include the 8(a) Business Development (BD) 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.
Based on the 2017 Economic and Agricultural Census (latest
available), SBA estimates that more than 11,200 firms in 259 industries
for which it has proposed to increase receipts based size standards,
(see Table 20, Impacts of Increases and Decreases to Receipts Based
Size Standards, below), not small under the current size standards,
will become small under the proposed size standards increases and
therefore become eligible for the above programs. That represents about
0.2 percent of all firms classified as small under the current size
standards in industries for which SBA has proposed increasing receipts
based size standards. If adopted, proposed size standards would result
in an increase in the small business share of total firms in those
industries from 98.4 percent to 98.5 percent. Similarly, the small
business share of total receipts would increase from 30 percent under
current size standards to 30.6 percent under proposed size standards,
if adopted. Finally, the small business share of total
[[Page 41260]]
employment would increase from 44.5 percent to 45.4 percent.
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BILLING CODE 8026-09-C
Besides proposing to increase receipts based size standards for 259
industries, SBA is proposing to increase assets based size standards
for four financial industries, because of which about 110 additional
financial firms (i.e., depository institutions and credit unions) would
qualify as small. If adopted, proposed assets based size standards
would result in an increase in the small business share of total firms
in those industries from 82 percent to 83.2 percent. Similarly, the
small business share of total assets would increase from 5.6 percent
under current size standards to 6.0 percent under proposed size
standards, if adopted.
Based on the FPDS data for fiscal years 2021-2023, SBA estimates
that 324 firms that are active in Federal contracting in those
industries would gain small business status under the proposed size
standards. Based on the same data, SBA estimates that those newly
qualified small businesses under the proposed increases to size
standards, if adopted, could receive Federal small business contracts
totaling about $647 million annually. That represents a 2.3 percent
increase to small business dollars from the baseline.
Under SBA's business loan programs, based on the data for fiscal
years 2021-2023, SBA estimates up to 84 of SBA's 7(a), CDC/504 and
micro loans totaling about $49 million could be made to these newly
qualified small businesses in those industries under the proposed size
standards. That represents a 0.3 percent increase to the loan amount
compared to the baseline.
Newly qualified small businesses will also benefit from the SBA's
EIDL program. Since the benefit provided through this program is
contingent on the occurrence and severity of a disaster in the future,
SBA cannot make a meaningful estimate of this impact. However, based on
the historical trends of the EIDL data, SBA estimates that, on an
annual basis, the newly defined small businesses under the proposed
increases to size standards, if adopted, could receive nine EIDL loans,
totaling about $0.4 million, representing a 0.3 percent increase from
the baseline.
Besides set-aside contracting and financial assistance discussed
above, small businesses also benefit through reduced fees, less
paperwork, and fewer compliance requirements that are available to
small businesses through Federal government. However, SBA has no data
to estimate the number of small businesses receiving such benefits and
monetary values of those benefits.
With more businesses qualifying as small under the proposed
increases to size standards, Federal agencies will have a larger pool
of small businesses from which to draw for their small business
procurement programs. Growing small businesses that are close to
exceeding the current size standards will be able to retain their small
business status for a longer period under the higher size standards,
thereby enabling them to continue to benefit from the small business
programs.
The added competition from more businesses qualifying as small can
result in lower prices to the government for procurements set aside or
reserved for small businesses, but SBA cannot quantify this impact.
Costs could be higher when full and open contracts are awarded to
HUBZone businesses that receive price evaluation preferences. However,
with agencies likely setting aside more contracts for small businesses
in response to the availability of a larger pool of small businesses
under the proposed increases to size standards, HUBZone firms might
actually end up getting more set-aside contracts and fewer full and
open contracts, thereby resulting in some cost savings to agencies.
While SBA cannot estimate such costs savings as it is impossible to
determine the number and value of unrestricted contracts to be
otherwise awarded to HUBZone firms will be awarded as set-asides, such
cost savings are likely to be relatively small as only a small fraction
of full and open contracts are awarded to HUBZone businesses.
Costs of Increases to Size Standards
Besides having to register in SAM to be able to participate in
Federal contracting and update the SAM profile annually, small
businesses incur no direct costs to gain or retain their small business
status because of increases to size standards. All businesses willing
to do business with Federal government must register in SAM and update
their SAM profiles annually, regardless of their size status. SBA
believes that a vast majority of businesses that are willing to
participate in Federal contracting are already registered in SAM and
update their SAM profiles annually. More importantly, this proposed
rule does not establish the new size standards for the very first time;
rather it intends to modify the existing size standards in accordance
with a statutory requirement and the latest data and other relevant
factors.
To the extent that the newly qualified small businesses could
become active in Federal procurement, the proposed increases to size
standards, if adopted, may entail some additional administrative costs
to the government because 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
[[Page 41262]]
Dynamic Small Business Search (DSBS) database or in certify.sba.gov,
more firms seeking certification as 8(a)/BD or HUBZone firms or
qualifying for small business, WOSB, EDWOSB, and SDVOSB status, and
more firms applying for SBA's 8(a)/BD and all small business mentor-
prot[eacute]g[eacute] programs. However, SBA estimates such costs to be
de minimis because necessary administrative processes and mechanisms
are already in place.
With an expanded pool of small businesses, it is likely that
Federal agencies would set aside more contracts for small businesses
under the proposed increases to size standards. One may surmise that
this might result in a higher number of small business size protests
and additional processing costs to agencies. However, the SBA's
historical data on size protests shows that the number of size protests
decreased following the increases to receipts based size standards as
part of the first and second five-year reviews of size standards under
the Jobs Act. Specifically, on an annual basis, the number of size
protests fell from about 500-600 during 2011-2016 to an average of
about 300 during 2020-2024. 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 de minimis because necessary mechanisms are already in place to
handle these added requirements.
Additionally, some Federal contracts may have higher costs. With a
greater number of businesses defined as small due to the proposed
increases to size standards, Federal agencies may choose to set aside
more contracts for competition among small businesses only instead of
using a full and open competition. The movement of contracts from
unrestricted competition to small business set-aside contracts might
result in competition among fewer total bidders, although there will be
more small businesses eligible to submit offers under the proposed size
standards. However, the additional costs associated with fewer bidders
are expected to be de minimis since, by law, procurements may be set
aside for small businesses under the 8(a)/BD, HUBZone, WOSB, EDWOSB, or
SDVOSB programs only if awards are expected to be made at fair and
reasonable prices.
Costs may also be higher when full and open contracts are awarded
to HUBZone businesses that receive price evaluation preferences.
However, with agencies likely setting aside more contracts for small
businesses in response to the availability of a larger pool of small
businesses under the proposed increases to size standards, HUBZone
firms might actually end up getting fewer full and open contracts,
thereby resulting in some cost savings to agencies. However, such cost
savings are likely to be minimal as only a small fraction of
unrestricted contracts are awarded to HUBZone businesses.
Transfer Impacts of Increases to Size Standards
The proposed increases to size standards, if adopted, may result in
some redistribution of Federal contracts between the newly qualified
small businesses and large businesses and between the newly qualified
small businesses and small businesses under the current standards.
However, it would have no impact on the overall economic activity since
total Federal contract dollars available for businesses to compete for
will not change with changes to size standards. While SBA cannot
quantify with certainty the actual outcome of the gains and losses from
the redistribution contracts among different groups of businesses, it
can identify several probable impacts in qualitative terms. With the
availability of a larger pool of small businesses under the proposed
increases to size standards, some unrestricted Federal contracts which
would otherwise be awarded to large businesses may be set aside for
small businesses. As a result, large businesses may lose some Federal
contracting opportunities. Similarly, some small businesses under the
current size standards may obtain fewer set aside contracts due to the
increased competition from more advanced businesses qualifying as small
under the proposed increases to size standards. This impact may be
offset by a greater number of procurements being set aside for all
small businesses. With larger businesses qualifying as small under
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's Circular A-4, SBA is required to consider regulatory
alternatives to the proposed changes in the proposed rule. In this
section, SBA describes and analyzes two such alternatives to the
proposed rule. Alternative Option One to the proposed rule, a more
stringent alternative to the proposed rule, would propose adopting size
standards based solely on the analytical results. In other words, the
size standards of 263 industries for which the analytical results
suggest raising size standards would be raised. However, the size
standards of 212 industries/subindustries for which the analytical
results suggest lowering size standards would be lowered. Alternative
Option Two, would propose retaining all size standards for all
industries. Below, SBA discusses and presents the net impacts of each
option.
Alternative Option One: Adopting All Calculated Size Standards
As discussed elsewhere in this proposed rule, Alternative Option
One would cause 7,882 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, in the first five-year review of
size standards under the Jobs Act, SBA adopted a general policy of not
lowering any size standard (except to exclude dominant firms) even when
the analytical results suggested some size standards might be lowered.
In the second five-year review of size standards under the Jobs Act, in
response to the economic impacts of the COVID-19 pandemic, SBA decided
to adopt the same general policy of not lowering size standards, even
if the analytical results suggested that some size standards might be
lowered. For the reasons explained elsewhere in this proposed rule, in
the current third five-year review of size standards under the Jobs
Act, SBA is proposing a general policy of not lowering any size
standards, except for excluding dominant firms from qualifying as
small.
The primary benefit of adopting this alternative is that SBA's
procurement, management, technical and financial assistance resources
would be targeted to the most appropriate beneficiaries of such
programs according to the analytical results. Adopting the size
standards suggested by the analytical results would also promote
consistency with analytical results in SBA's exercise of its authority
to determine size standards. However, SBA expects the
[[Page 41263]]
benefits of not lowering size standards to exceed the benefits of
adopting size standards suggested by analytical results. SBA seeks
public comment on the impact of adopting the size standard as suggested
by the analytical results.
As explained in the Size Standards Methodology White Paper, in
addition to adopting all results of the primary analysis, SBA evaluates
other relevant factors as needed such as the impact of the reductions
or increases of size standards on the distribution of contracts awarded
to small businesses and may adopt different results with the intention
of mitigating potential negative impacts.
We have discussed already the benefits and costs of increasing 263
size standards (259 receipts based and four assets based). Below we
discuss the benefits and costs of decreasing size standards for 213
industries/subindustries.
Benefits of Decreases to Size Standards
The most significant benefit to businesses from decreases to size
standards when the SBA's analysis suggests such decreases is to ensure
that size standards are more reflective of latest industry structure
and Federal market trends and that Federal small business assistance is
more effectively targeted to its intended beneficiaries. These include
SBA's 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 contracting and business development programs, such as small
business, 8(a)/BD, HUBZone, WOSB, EDWOSB, and SDVOSB programs. The
adoption of smaller size standards when the results support them
diminishes the risk of awarding contracts to firms which are not small
anymore.
Decreasing size standards may reduce the administrative costs of
the government, because the risk of awarding contracts to other than
small businesses may diminish when the size standards reflect better
the structure of the market. The risks of providing SBA's loans to
firms that are not needing them the most, or allowing firms that are
not eligible for small business set-asides or to participate on the SBA
procurement programs will provide for a better chance for smaller firms
to grow and benefit from the opportunities available on the Federal
market, and strengthen the small business industrial base for the
Federal Government.
Costs of Decreases to Size Standards
With fewer businesses qualifying as small under the decreases to
size standards, Federal agencies will have a smaller pool of small
businesses from which to draw for their small business procurement
programs. For example, under Alternative Option One, during fiscal
years 2021-2023, agencies awarded, on an annual basis, about $60.4
billion in small business contracts in those 213 industries/
subindustries for which this Option considered decreasing size
standards. Table 20, above, shows that lowering those 213 size
standards would reduce Federal contract dollars awarded to small
businesses by about $2.0 billion or about 3.4 percent relative to the
baseline level, of which 41.6 percent are accounted for by the
Construction Sector (NAICS 23), followed by the Professional,
Scientific, and Technical Services Sector (NAICS 54). Because of the
importance of the construction and professional, scientific, and
technical services sectors for the Federal procurement and the
immediate impact on businesses that will see their status as small
changed relatively fast, SBA could adopt certain mitigating measures to
reduce the negative impact under the assumptions of Option One. SBA
could adopt one or more of the following three actions: 1. to accept
decreases in size standards as suggested by the analytical results, 2.
to decrease size standards by a smaller amount than the calculated
threshold, and 3. to retain the size standards at their current levels.
Nevertheless, since Federal agencies are still required to meet the
statutory small business contracting goal of 23 percent, actual impacts
on the overall set aside activity is likely to be smaller as agencies
are likely to award more set aside contracts to small businesses that
continue to remain small under the reduced size standards.
With fewer businesses qualifying as small, the decreased
competition can also result in higher prices to the Government for
procurements set aside or reserved for small businesses, but SBA cannot
quantify this impact. However, SBA estimates an almost null impact or
non-significant reduction in dollars obligated to small businesses, if
mitigation measures are adopted.
Decreases to size standards would have a very minor impact on small
businesses applying for SBA's business loan programs 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 2021-2023, SBA estimates that about 72 of SBA's 7(a), CDC/504 and
micro loans with total amounts of $35 million could not be made to
those small businesses that would lose eligibility under the reduced
size standards (before mitigation). That represents about one 0.4
percent decrease in the loan amounts compared to the baseline. Table
20, above, shows these results. However, the actual impact could be
much less as businesses losing small business eligibility under the
decreases to industry based size standards could still qualify for
SBA's loans under the tangible net worth and net income based
alternative size standard.
Businesses losing small business status would also be impacted in
terms of access to loans through the SBA's EIDL program. However, SBA
expects such an impact to be minimal because the vast majority of EIDL
recipients were well below the reduced size standards. As shown in
Table 20 (above), based on EIDL data during fiscal years 2021-2023,
only six loans, totaling $0.3 million, could not be made to businesses
losing small business status if SBA were to decrease size standards in
those 213 industries/subindustries. Additionally, since this program is
contingent on the occurrence and severity of a disaster in the future,
SBA cannot make a meaningful estimate of this impact.
Small businesses becoming other than small if size standards were
decreased might lose benefits through reduced fees, less paperwork, and
fewer compliance requirements that are available to small businesses
through Federal government, but SBA has no data to quantify this
impact. However, if agencies determine that SBA's size standards do not
adequately serve such purposes, they can establish a different size
standard with an approval from SBA if they are required to use SBA's
size standards for their programs.
Transfer Impacts of Decreases to Size Standards
If the size standards were decreased under Alternative Option One,
it may result in a redistribution of Federal contracts between small
businesses losing the small business status and large businesses, and
between small businesses losing the small business status and small
businesses remaining small under the reduced size standards. However,
as under the proposed increases to size standards, it would have no
impact on the overall economic activity since total Federal contract
dollars available for businesses to compete for will stay the same.
While SBA cannot estimate with certainty the actual outcome of the
gains and losses
[[Page 41264]]
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 percent of dollars to small businesses, SBA expects
the movement of set-aside contracts to unrestricted competition to be
limited. For the same reason, small businesses remaining small under
the reduced size standards are likely to obtain more set aside
contracts due to the reduced competition from fewer businesses
qualifying as small under the decreases to size standards. With some
larger small businesses losing small business status under the
decreases to size standards, smaller small businesses would likely
become more competitive in obtaining set aside contracts. However, SBA
cannot quantify these impacts.
Net Impacts of Alternative Option One
To estimate the net impacts of Alternative Option One, SBA followed
the same methodology the Agency used to evaluate the impacts of the
proposed increases to size standards (see Table 20, above). However,
under Alternative Option One, SBA used the calculated size standards
instead of the proposed ones to determine the net impacts of adopting
changes to current thresholds. The impacts of the increases of size
standards were already shown in Table 20 (above). Also presented in
Table 20 are the impacts of the decreases in size standards, as well as
the net impacts of adopting the calculated results under Alternative
Option One.
Based on the 2017 Economic and Agricultural Census, SBA estimates
that in 476 industries or subindustries (including 263 increases and
213 decreases) for which the analytical results suggested changing the
size standards, about 3,350 firms (see Table 20, above) would become
small under Alternative Option One. That represents less than 0.1
percent of all firms in those industries/subindustries classified as
small under the current size standards.
Based on the FPDS data for fiscal years 2021-2023, SBA estimates
that, in terms of net impact, about 46 active firms in Federal
contracting in those industries, most of them from the construction
sector, would lose small business status under Alternative Option One.
This represents a decrease of about 0.1 percent of the total number of
small businesses participating in Federal contracting under the current
size standards. Based on the same data, SBA estimates that about $1.4
billion of Federal procurement dollars would not be available to firms
losing their small status. This represents a decrease of 1.6 percent
from the baseline. Again, a large amount of the losses are accounted
for by the construction sector.
Based on the SBA's business loan data for fiscal years 2021-2023,
the total number of 7(a), CDC/504 and micro loans may decrease by about
12 loans, and the loan amount will decrease by about $14 million. This
represents about 0.1 percent decrease in the SBA business loan amount
relative to the baseline.
Firms' participation under the SBA's EIDL program will be affected
as well. Since the benefit provided through this program is contingent
on the occurrence and severity of a disaster in the future, SBA cannot
make a meaningful estimate of this impact. However, based on the
historical trends of the EIDL data, SBA estimates that, on an annual
basis, the net impact of Alternative Option One on additional loans is
three, and additional total loan amount of about $0.1 million for the
industries/subindustries for which analytical results suggested changes
to size standards.
Alternative Option Two: Retaining All Current Size Standards
Under this option, as discussed elsewhere, SBA considered retaining
the current levels of all size standards even though the analytical
results may suggest changing them. SBA estimates a net impact of zero
for this option, when compared to the baseline. However, if we compare
the proposal of adopting 263 increases to size standards with this
alternative approach, the benefits for small businesses of adopting the
former will not be attained.
Executive Order 14192
E.O. 14192, titled ``Unleashing Prosperity Through Deregulation''
(90 FR 9065; February 6, 2025), and the accompanying OMB guidance (OMB
M-25-20), dated March 26, 2025, require agencies to identify at least
10 existing rules to be repealed for each new regulation. E.O. 14192
and OMB guidance require agencies to ensure the total incremental costs
of new regulations, including repealed regulations, being finalized in
fiscal year 2025, shall be significantly less than zero. E.O. 14192 and
OMB guidance provide that any new incremental costs associated with new
regulations shall, to the extent permitted by law, be offset by the
elimination of existing costs associated with at least 10 prior
regulations being repealed.
This rule is not an E.O. 14192 ``regulatory action,'' because this
rule is not significant under E.O. 12866.
Initial Regulatory Flexibility Act
According to the Regulatory Flexibility Act (RFA), 5 U.S.C. 601-
612, when an agency issues a rulemaking, it must prepare a regulatory
flexibility analysis to address the impact of the rule on small
entities.
This proposed rule, if adopted, may have a significant impact on a
substantial number of small businesses in the industries and
subindustries covered by this proposed rule. As described above, this
rule may affect small businesses seeking Federal contracts, loans under
SBA's 7(a), CDC/504, micro EIDL Loan Programs, and assistance under
other Federal small business programs.
Immediately below, SBA sets forth an initial regulatory flexibility
analysis (IRFA) of this proposed rule addressing the following
questions: (1) What are the need for and objective of the rule?; (2)
What are SBA's description and estimate of the number of small
businesses to which the rule will apply?; (3) What are the projected
reporting, record keeping, and other compliance requirements of the
rule?; (4) What are the relevant Federal rules that may duplicate,
overlap, or conflict with the rule?; and (5) What alternatives will
allow the Agency to accomplish its regulatory objectives while
minimizing the impact on small businesses?
1. What are 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 of the industries covered by this
proposed rule. Such changes can be enough to support revisions to
current size standards for some industries. Based on the analysis of
the latest data available, SBA believes that the revised standards in
this proposed rule more appropriately reflect the size of businesses
that need Federal assistance. The Small Business Jobs Act of 2010 also
requires SBA to review every five years all size standards and make
necessary adjustments to reflect market conditions. SBA completed the
first five-year review of size standards in 2016 and the second five-
year review in 2023. This rule is part of the ongoing third five-year
review of size standards under the Jobs Act.
[[Page 41265]]
2. What are SBA's description and estimate of the number of small
businesses to which the rule will apply?
Based on data from the 2017 Economic and Agricultural Census
(latest available when this proposed rule was prepared), SBA estimates
that there are about 5.04 million small firms covered by this
rulemaking under industries with proposed increases to size standards.
If the proposed rule is adopted in its present form, SBA estimates that
an additional 11,300 businesses will become small.
3. What are the projected reporting, record keeping and other
compliance requirements of the rule?
The proposed size standard changes impose no additional reporting
or record keeping requirements on small businesses. However, qualifying
for Federal procurement and a number of other programs requires that
businesses register in SAM and self-certify that they are small at
least once annually. Therefore, businesses opting to participate in
those programs must comply with SAM requirements. There are no costs
associated with SAM registration or certification. Changing size
standards alters the access to SBA's programs that assist small
businesses but does not impose a regulatory burden because they neither
regulate nor control business behavior.
4. What are the relevant Federal rules, which may duplicate,
overlap or conflict with the rule?
Under section 3(a)(2)(C) of the Small Business Act, 15 U.S.C.
632(a)(2)(c), Federal agencies must use SBA's size standards to define
a small business, unless specifically authorized by statute to do
otherwise. In 1995, SBA published in the Federal Register a list of
statutory and regulatory size standards that identified the application
of SBA's size standards as well as other size standards used by Federal
agencies (60 FR 57988 (November 24, 1995)). SBA is not aware of any
Federal rules that would duplicate or conflict with establishing size
standards.
However, the Small Business Act and SBA's regulations allow Federal
agencies to develop different size standards if they believe that SBA's
size standards are not appropriate for their programs, with the
approval of SBA's Administrator (13 CFR 121.903). The Regulatory
Flexibility Act authorizes an Agency to establish an alternative small
business definition, after consultation with the Office of Advocacy of
the U.S. Small Business Administration (5 U.S.C. 601(3)).
5. What alternatives will allow the Agency to accomplish its
regulatory objectives while minimizing the impact on small entities?
By law, SBA is required to develop numerical size standards for
establishing eligibility for Federal small business assistance
programs. Other than varying size standards by industry and changing
the size measures, no practical alternative exists to the systems of
numerical size standards.
Executive Order 13563
Executive Order 13563 emphasizes the importance of quantifying both
costs and benefits, reducing costs, harmonizing rules, and promoting
flexibility. A description of the need for this regulatory action and
benefits and costs associated with this action including possible
distributional impacts that relate to Executive Order 13563 is included
above in the Regulatory Impact Analysis under Executive Order 12866.
Additionally, Executive Order 13563, section 6, calls for retrospective
analyses of existing rules.
The review of size standards in the industries covered by this
proposed rule is consistent with section 6 of Executive Order 13563 and
the Jobs Act which requires SBA to review all size standards and make
necessary adjustments to reflect market conditions. Specifically, the
Jobs Act requires SBA to review at least one-third of all size
standards during every 18-month period from the date of its enactment
(September 27, 2010) and to review all size standards not less
frequently than once every five years, thereafter. In accordance with
the Jobs Act, SBA completed the first five-year comprehensive review of
size standards in 2016 and the second five-year comprehensive review in
2023. This proposed rule is part of the third five-year comprehensive
review of size standards under the Jobs Act.
In conjunction with the third five-year review of size standards
under the Jobs Act, SBA issued a White Paper entitled ``Revised Size
Standards Methodology'' and published a notice in the December 11,
2023, edition of the Federal Register (88 FR 85852) to advise the
public that the document is available for public review and comments.
Pursuant to section 1344 of the Jobs Act, on June 23 and 25, 2023, SBA
held two public forums on size standards to update the public on the
status of the quinquennial reviews of size standards under the Jobs Act
and seek public feedback on proposed revisions to the size standards
methodology. The ``Size Standards Methodology'' White Paper explains
how SBA establishes, reviews, or modifies its small business size
standards. SBA received 21 comments, including one received during the
public forums on size standards. SBA considered all input, suggestions,
recommendations, and relevant information obtained from industry
groups, individual businesses, and Federal agencies in finalizing the
Revised Methodology. Along with the publication of a notice in the
September 12, 2024, Federal Register issue (89 FR 74109), on the same
date, SBA issued the final Revised Methodology at its website at
www.sba.gov/size. SBA has relied on the Revised Methodology to develop
the proposed size standards changes in this proposed rule.
Executive Order 12988
This action meets applicable standards set forth in sections 3(a)
and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize
litigation, eliminate ambiguity, and reduce burden. The action does not
have retroactive or preemptive effect.
Executive Order 13132
For purposes of Executive Order 13132, SBA has determined that this
proposed rule will not have substantial, direct effects on the States,
on the relationship between the national government and the States, or
on the distribution of power and responsibilities among the various
levels of government. Therefore, SBA has determined that this proposed
rule has no federalism implications warranting preparation of a
federalism assessment.
Paperwork Reduction Act
For the purpose of the Paperwork Reduction Act, 44 U.S.C. Ch. 35,
SBA has determined that this rule will not impose any new reporting or
record keeping requirements.
List of Subjects in 13 CFR Part 121
Administrative practice and procedure, Authority delegations
(Government agencies), Government procurement, Government property,
Grant programs--business, Individuals with disabilities,
Intergovernmental relations, Investigations, Investment companies, Loan
programs--business, Reporting and recordkeeping requirements, Small
businesses.
For the reasons set forth in the preamble, SBA proposes to amend 13
CFR part 121 as follows:
PART 121--SMALL BUSINESS SIZE REGULATIONS
0
1. The authority citation for part 121 continues to read as follows:
[[Page 41266]]
Authority: 15 U.S.C. 632, 634(b)(6), 636(a)(36) 662, and
694a(9).
0
2. In Sec. 121.201, amend the table ``Small Business Size Standards by
NAICS Industry'' by revising:
0
a. Under Subsector 111, the entries for ``111110'', ``111120'',
``111140'', ``111150'', ``111160'', ``111191'', ``111199'', ``111910'',
``111940'', ``111991'', ``111992'', and ``111998'';
0
b. Under Subsector 112, the entries for ``112111'', ``112320'',
``112420'', ``112920'', and ``112990'';
0
c. Under Subsector 113, the entries for ``113110'' and ``113210'';
0
d. Under Subsector 114, the entries for ``114112''. ``114119'', and
``114210'';
0
e. Under Subsector 115, the entries for ``115111'', ``115112'',
``115113''; ``115115'', ``115116'', ``115210'', and ``115310'';
0
f. Under Subsection 213, the entry for ``213115'';
0
g. Under Subsector 221, the entries for ``221310'' and ``221330'';
0
h. Under Subsector 238, the entry for ``238290'';
0
i. Under Subsector 441, the entry for ``441330'';
0
j. Under Subsector 444, the entries for ``444120'', ``444140'',
``444230'', and ``444240'';
0
k. Under Subsector 445, the entries for ``445132'', ``445230'',
``445240'', ``445250'', ``445291'', ``445292'', ``445298'', and
``445320'';
0
l. Under Subsector 449, the entries for ``449110'', ``449121'',
449122'', and ``449129'';
0
m. Under Subsector 456, the entries for ``456110'' and ``456199'';
0
n. Under Subsector 457, the entry for ``457120'';
0
o. Under Subsector 458, the entries for ``458210'', ``458310'', and
``458320'';
0
p. Under Subsector 459, the entries for ``459110'', ``459120'',
``459310'', ``459420'', ``459510'', ``459910'', ``459920'', ``459930'',
and ``459999'';
0
q. Under Subsector 481, the entry for ``481219'';
0
r. Under Subsector 485, the entries for ``485113'', ``485210'',
``485310'', ``485410'' ``485510'', ``485991'', and ``485999'';
0
s. Under Subsector 486, the entry for ``486210'';
0
t. Under Subsector 487, the entries for ``487210'' and ``487990'';
0
u. Under Subsector 488, the entries for ``488410'', ``488490'',
``488510'', and ``488999'';
0
v. Under Subsector 488, eliminate the entry ``488510 (Exception)'';
0
w. Under Subsector 493, the entry for ``493120'';
0
x. Under Subsector 512, the entries for ``512132'', ``512240'', and
``512290'';
0
y. Under Subsector 517, the entries for ``517410'' and ``517810'';
0
z. Under Subsector 518, the entry for ``518210'';
0
aa. Under Subsector 519, the entry for ``519210'';
0
bb. Under Subsector 522, the entries for ``522110'', ``522130'',
``522180'', ``522210'', ``522310'' and ``522390'';
0
cc. Under Subsector 524, the entries for ``524210'', ``524292'', and
``524298'';
0
dd. Under Subsector 531, the entries for ``531210'', ``531311'',
``531312'', ``531320'', and ``531390'';
0
ee. Under Subsector 532, the entries for ``532284'', ``532289'',
``532310'', ``532411'', and ``532412'';
0
ff. Under Subsector 541, the entries for ``541110'', ``541199'',
``541211'', ``541213'', ``541310'', ``541320'', ``541330'', ``541330
(Exception 1)'', ``541330 (Exception 2)'', ``541330 (Exception 3)'',
``541340'', ``541350'', ``541360'', ``541380'', ``541410'', ``541420'',
``541430'', ``541490'', ``541611'', ``541613'', ``541614'', ``541720'',
``541810'', ``541820'', ``541830'', ``541840'', ``541860'', ``541870'',
``541890'', ``541910'', ``541921'', ``541922'', ``541930'', and
``541940'';
0
gg. Under Subsector 561.the entries for ``561110'', ``561330'',
``561410'', ``561421'', ``561422'', ``561439'', ``561440'', ``561450'',
``561492'', ``561499'', ``561510'', ``561599'', ``561612'', ``561613'',
``561621'', ``561710'', ``561730'', ``561740'', ``561790'', ``561910'',
``561920'', and ``561990'';
0
hh. Under Subsector 562, the entry for ``562991'';
0
ii. Under Subsector 611, the entries for ``611110'', ``611310'',
``611410'', ``611420'', ``611430'', ``611511'', ``611512'', ``611513'',
``611610'' ``611620'', ``611630'', ``611691'', ``611692'', and
``611710'';
0
jj. Under Subsector 621, the entries for ``621111'', ``621210'',
``621310'', ``621320'', ``621330'', ``621340'', ``621391'', ``621399'',
``621410'', ``621493'', ``621498'', ``621511'', ``621512'', ``621610'',
``621910'', and ``621999'';
0
kk. Under Subsector 623, the entries for ``623210'', ``623220'',
``623312'', and ``623990'';
0
ll. Under Subsector 624, the entries for ``624110'', ``624120'',
``624190'', ``624210'', ``624221'', ``624229'', ``624230'', ``624310'',
and ``624410'';
0
mm. Under Subsector 711, the entries for ``711120'', ``711130'',
``711190'', ``711219'', ``711320'', ``711410'', and ``711510'';
0
nn. Under Subsector 712, the entries for ``712120'' and ``712190'';
0
oo. Under Subsector 713, the entries for ``713120'', ``713920'',
``713930'', ``713940'', ``713950'', and ``713990'';
0
pp. Under Subsector 721, the entries for ``721191'', ``721199'',
``721211'', ``721214'', and ``721310'';
0
qq. Under Subsector 722, the entries for ``722320'', ``722330'',
``722410'', ``722511'', and ``722513'';
0
rr. Under Subsector 811, the entries for ``811111'', ``811114'',
``811121'', ``811122'', ``811191'', ``811192'', ``811198'', ``811310'',
``811411'', ``811412'', ``811420'', ``811430'', and ``811490'';
0
ss. Under Subsector 812, the entries for ``812111'', ``812112'',
``812113'', ``812199'', ``812210'', ``812310'', ``812320'', ``812910'',
``812921'', and ``812990''; and
0
tt. Under Subsector 813, the entries for ``813110'', ``813311'',
``813312'', ``813319'', ``813410'', ``813910'', ``813920'', ``813930'',
``813940'', and ``813990''.
0
3. Include a new footnote, Footnote 19, to entries ``541330'',
``541330 (Exception 1)'', ``541330 (Exception 2)'', and ``541330
Exception 3)''.
The revisions read as follows:
Sec. 121.201 What size standards has SBA identified by North American
Industry Classification System codes?
* * * * *
Small Business Size Standards by NAICS Industry
----------------------------------------------------------------------------------------------------------------
Size standards in
NAICS code NAICS U.S. industry title millions of Size standards in number of
dollars employees
----------------------------------------------------------------------------------------------------------------
Sector 11--Agriculture, Forestry, Fishing and Hunting
----------------------------------------------------------------------------------------------------------------
Subsector 111--Crop Production
----------------------------------------------------------------------------------------------------------------
111110......................... Soybean Farming............. $2.75 ..............................
[[Page 41267]]
111120......................... Oilseed (except Soybean) 2.75 ..............................
Farming.
* * * * * * *
111140......................... Wheat Farming............... 2.5 ..............................
111150......................... Corn Farming................ 2.75 ..............................
111160......................... Rice Farming................ 2.75 ..............................
111191......................... Oilseed and Grain 2.75 ..............................
Combination Farming.
111199......................... All Other Grain Farming..... 2.75 ..............................
* * * * * * *
111910......................... Tobacco Farming............. 2.75 ..............................
* * * * * * *
111940......................... Hay Farming................. 2.75 ..............................
111991......................... Sugar Beet Farming.......... 3.0 ..............................
111992......................... Peanut Farming.............. 3.0 ..............................
111998......................... All Other Miscellaneous Crop 3.0 ..............................
Farming.
----------------------------------------------------------------------------------------------------------------
Subsector 112--Animal Production and Aquaculture
----------------------------------------------------------------------------------------------------------------
112111......................... Beef Cattle Ranching and 2.75 ..............................
Farming.
* * * * * * *
112320......................... Broilers and Other Meat Type 3.75 ..............................
Chicken Production.
* * * * * * *
112420......................... Goat Farming................ 2.75 ..............................
* * * * * * *
112920......................... Horses and Other Equine 3.0 ..............................
Production.
* * * * * * *
112990......................... All Other Animal Production. 3.25 ..............................
----------------------------------------------------------------------------------------------------------------
Subsector 113--Forestry and Logging
----------------------------------------------------------------------------------------------------------------
113110......................... Timber Tract Operations..... 26.0 ..............................
113210......................... Forest Nurseries and 21.5 ..............................
Gathering of Forest
Products.
* * * * * * *
----------------------------------------------------------------------------------------------------------------
Subsector 114--Fishing, Hunting and Trapping
----------------------------------------------------------------------------------------------------------------
* * * * * * *
114112......................... Shellfish Fishing........... 15.0 ..............................
114119......................... Other Marine Fishing........ 25.5 ..............................
114210......................... Hunting and Trapping........ 14.5 ..............................
----------------------------------------------------------------------------------------------------------------
Subsector 115--Support Activities for Agriculture and Forestry
----------------------------------------------------------------------------------------------------------------
115111......................... Cotton Ginning.............. 17.0 ..............................
115112......................... Soil Preparation, Planting, 12.0 ..............................
and Cultivating.
115113......................... Crop Harvesting, Primarily 21.5 ..............................
by Machine.
* * * * * * *
115115......................... Farm Labor Contractors and 20.0 ..............................
Crew Leaders.
115116......................... Farm Management Services.... 22.0 ..............................
115210......................... Support Activities for 14.0 ..............................
Animal Production.
115310......................... Support Activities for 13.5 ..............................
Forestry.
* * * * * * *
----------------------------------------------------------------------------------------------------------------
Sector 21--Mining, Quarrying, and Oil and Gas Extraction
----------------------------------------------------------------------------------------------------------------
* * * * * * *
----------------------------------------------------------------------------------------------------------------
Subsector 213--Support Activities for Mining
----------------------------------------------------------------------------------------------------------------
[[Page 41268]]
* * * * * * *
213115......................... Support Activities for 27.0 ..............................
Nonmetallic Minerals
(except Fuels) Mining.
----------------------------------------------------------------------------------------------------------------
Sector 22--Utilities
----------------------------------------------------------------------------------------------------------------
Subsector 221--Utilities
----------------------------------------------------------------------------------------------------------------
* * * * * * *
221310......................... Water Supply and Irrigation 41.5 ..............................
Systems.
* * * * * * *
221330......................... Steam and Air-Conditioning 36.0 ..............................
Supply.
----------------------------------------------------------------------------------------------------------------
Sector 23--Construction
----------------------------------------------------------------------------------------------------------------
* * * * * * *
----------------------------------------------------------------------------------------------------------------
Subsector 238--Specialty Trade Contractors
----------------------------------------------------------------------------------------------------------------
* * * * * * *
238120......................... Structural Steel and Precast 19.5 ..............................
Concrete Contractors.
* * * * * * *
238290......................... Other Building Equipment 27.5 ..............................
Contractors.
----------------------------------------------------------------------------------------------------------------
* * * * * * *
----------------------------------------------------------------------------------------------------------------
Sector 44-45--Retail Trade
----------------------------------------------------------------------------------------------------------------
* * * * * * *
----------------------------------------------------------------------------------------------------------------
Subsector 441--Motor Vehicle and Parts Dealers
----------------------------------------------------------------------------------------------------------------
* * * * * * *
441330......................... Automotive Parts and 29.5 ..............................
Accessories Retailers.
* * * * * * *
----------------------------------------------------------------------------------------------------------------
Subsector 444--Building Material and Garden Equipment and Supplies Dealers
----------------------------------------------------------------------------------------------------------------
* * * * * * *
444120......................... Paint and Wallpaper 38.5 ..............................
Retailers.
444140......................... Hardware Retailers.......... 22.0 ..............................
* * * * * * *
444230......................... Outdoor Power Equipment 13.5 ..............................
Retailers.
444240......................... Nursery, Garden Center, and 25.0 ..............................
Farm Supply Retailers.
----------------------------------------------------------------------------------------------------------------
Subsector 445--Food and Beverage Stores
----------------------------------------------------------------------------------------------------------------
* * * * * * *
445132......................... Vending Machine Operators... 28.5 ..............................
445230......................... Fruit and Vegetable 14.0 ..............................
Retailers.
445240......................... Meat Retailers.............. 11.5 ..............................
445250......................... Fish and Seafood Retailers.. 12.0 ..............................
445291......................... Baked Goods Retailers....... 16.5 ..............................
445292......................... Confectionery and Nut 21.5 ..............................
Retailers.
445298......................... All Other Specialty Food 11.5 ..............................
Retailers.
445320......................... Beer, Wine, and Liquor 14.0 ..............................
Retailers.
----------------------------------------------------------------------------------------------------------------
Subsector 449--Furniture, Home Furnishings, Electronics, and Appliance Retailers
----------------------------------------------------------------------------------------------------------------
449110......................... Furniture Retailers......... 26.0 ..............................
[[Page 41269]]
449121......................... Floor Covering Retailers.... 14.5 ..............................
449122......................... Window Treatment Retailers.. 13.0 ..............................
449129......................... All Other Home Furnishings 34.5 ..............................
Retailers.
* * * * * * *
----------------------------------------------------------------------------------------------------------------
Subsector 456--Health and Personal Care Retailers
----------------------------------------------------------------------------------------------------------------
456110......................... Pharmacies and Drug 38.0 ..............................
Retailers.
* * * * * * *
456199......................... All Other Health and 15.0 ..............................
Personal Care Retailers.
----------------------------------------------------------------------------------------------------------------
Subsector 457--Gasoline Stations and Fuel Dealers
----------------------------------------------------------------------------------------------------------------
* * * * * * *
457120......................... Other Gasoline Stations..... 36.0 ..............................
* * * * * * *
----------------------------------------------------------------------------------------------------------------
Subsector 458--Clothing, Clothing Accessories, Shoe, and Jewelry Retailers
----------------------------------------------------------------------------------------------------------------
* * * * * * *
458210......................... Shoe Retailers.............. 34.5 ..............................
458310......................... Jewelry Retailers........... 23.5 ..............................
458320......................... Luggage and Leather Goods 41.0 ..............................
Retailers.
----------------------------------------------------------------------------------------------------------------
Subsector 459--Sporting Goods, Hobby, Musical Instrument, Book, and Miscellaneous Retailers
----------------------------------------------------------------------------------------------------------------
459110......................... Sporting Goods Retailers.... 28.5 ..............................
459120......................... Hobby, Toy, and Game 35.5 ..............................
Retailers.
* * * * * * *
459310......................... Florists.................... 10.5 ..............................
* * * * * * *
459420......................... Gift, Novelty, and Souvenir 19.0 ..............................
Retailers.
459510......................... Used Merchandise Retailers.. 17.0 ..............................
459910......................... Pet and Pet Supplies 33.5 ..............................
Retailers.
459920......................... Art Dealers................. 24.0 ..............................
459930......................... Manufactured (Mobile) Home 26.0 ..............................
Dealers.
* * * * * * *
459999......................... All Other Miscellaneous 34.0 ..............................
Retailers.
----------------------------------------------------------------------------------------------------------------
Sector 48-49--Transportation and Warehousing
----------------------------------------------------------------------------------------------------------------
Subsector 481--Air Transportation
----------------------------------------------------------------------------------------------------------------
* * * * * * *
481219......................... Other Nonscheduled Air 28.0 ..............................
Transportation.
* * * * * * *
----------------------------------------------------------------------------------------------------------------
Subsector 485--Transit and Ground Passenger Transportation
----------------------------------------------------------------------------------------------------------------
* * * * * * *
485113......................... Bus and Other Motor Vehicle 41.0 ..............................
Transit Systems.
* * * * * * *
485210......................... Interurban and Rural Bus 34.00 ..............................
Transportation.
485310......................... Taxi and Ridesharing 37.0 ..............................
Services.
* * * * * * *
485410......................... School and Employee Bus 31.5 ..............................
Transportation.
485510......................... Charter Bus Industry........ 20.0 ..............................
485991......................... Special Needs Transportation 19.5 ..............................
[[Page 41270]]
485999......................... All Other Transit and Ground 19.5 ..............................
Passenger Transportation.
----------------------------------------------------------------------------------------------------------------
Subsector 486--Pipeline Transportation
----------------------------------------------------------------------------------------------------------------
* * * * * * *
486210......................... Pipeline Transportation of 46.00 ..............................
Natural Gas.
* * * * * * *
----------------------------------------------------------------------------------------------------------------
Subsector 487--Scenic and Sightseeing Transportation
----------------------------------------------------------------------------------------------------------------
* * * * * * *
487210......................... Scenic and Sightseeing 18.0 ..............................
Transportation, Water.
487990......................... Scenic and Sightseeing 27.5 ..............................
Transportation, Other.
----------------------------------------------------------------------------------------------------------------
Subsector 488--Support Activities for Transportation
----------------------------------------------------------------------------------------------------------------
* * * * * * *
488410......................... Motor Vehicle Towing........ 11.0 ..............................
488490......................... Other Support Activities for 24.0 ..............................
Road Transportation.
488510......................... Freight Transportation \10\ 34.0 ..............................
Arrangement \10\.
* * * * * * *
488999......................... All Other Support Activities 31.0 ..............................
for Transportation.
* * * * * * *
----------------------------------------------------------------------------------------------------------------
Subsector 493--Warehousing and Storage
----------------------------------------------------------------------------------------------------------------
* * * * * * *
493120......................... Refrigerated Warehousing and 39.5 ..............................
Storage.
* * * * * * *
----------------------------------------------------------------------------------------------------------------
Sector 51--Information
----------------------------------------------------------------------------------------------------------------
Subsector 512--Motion Picture and Sound Recording Industries
----------------------------------------------------------------------------------------------------------------
* * * * * * *
512132......................... Drive-In Motion Picture 18.0 ..............................
Theaters.
* * * * * * *
512240......................... Sound Recording Studios..... 13.5 ..............................
* * * * * * *
512290......................... Other Sound Recording 27.5 ..............................
Industries.
* * * * * * *
----------------------------------------------------------------------------------------------------------------
Subsector 517--Telecommunications
----------------------------------------------------------------------------------------------------------------
* * * * * * *
517410......................... Satellite Telecommunications 45.0 ..............................
517810......................... All Other Telecommunications 45.5 ..............................
----------------------------------------------------------------------------------------------------------------
Subsector 518--Computing Infrastructure Providers, Data Processing, Web Hosting, and Related Services
----------------------------------------------------------------------------------------------------------------
518210......................... Computing Infrastructure 40.5 ..............................
Providers, Data Processing,
Web Hosting, and Related
Services.
----------------------------------------------------------------------------------------------------------------
Subsector 519--Web Search Portals, Libraries, Archives, and Other Information Services
----------------------------------------------------------------------------------------------------------------
519210......................... Libraries and Archives...... 24.0 ..............................
[[Page 41271]]
* * * * * * *
----------------------------------------------------------------------------------------------------------------
Sector 52--Finance and Insurance
----------------------------------------------------------------------------------------------------------------
Subsector 522--Credit Intermediation and Related Activities
----------------------------------------------------------------------------------------------------------------
522110......................... Commercial Banking \8\...... \8\ 925 million ..............................
in assets
522130......................... Credit Unions \8\........... \8\ 925 million ..............................
in assets
522180......................... Savings Institutions and \8\ 925 million ..............................
Other Depository Credit in assets
Intermediation\8\.
522210......................... Credit Card Issuing \8\..... \8\ 925 million ..............................
in assets
* * * * * * *
522310......................... Mortgage and Nonmortgage 23.5 ..............................
Loan Brokers.
* * * * * * *
522390......................... Other Activities Related to 37.0 ..............................
Credit Intermediation.
* * * * * * *
----------------------------------------------------------------------------------------------------------------
Subsector 524--Insurance Carriers and Related Activities
----------------------------------------------------------------------------------------------------------------
* * * * * * *
524210......................... Insurance Agencies and 19.0 ..............................
Brokerages.
* * * * * * *
524292......................... Pharmacy Benefit Management 47.0 ..............................
and Other Third Party
Administration of Insurance
and Pension Funds.
524298......................... All Other Insurance Related 32.0 ..............................
Activities.
* * * * * * *
----------------------------------------------------------------------------------------------------------------
Sector 53--Real Estate and Rental and Leasing
----------------------------------------------------------------------------------------------------------------
Subsector 531--Real Estate
----------------------------------------------------------------------------------------------------------------
* * * * * * *
531210......................... Offices of Real Estate \10\ 19.5 ..............................
Agents and Brokers \10\.
531311......................... Residential Property 17.5 ..............................
Managers.
531312......................... Nonresidential Property 32.5 ..............................
Managers.
531320......................... Offices of Real Estate 16.0 ..............................
Appraisers.
531390......................... Other Activities Related to 25.0 ..............................
Real Estate.
----------------------------------------------------------------------------------------------------------------
Subsector 532--Rental and Leasing Services
----------------------------------------------------------------------------------------------------------------
* * * * * * *
532284......................... Recreational Goods Rental... 14.0 ..............................
532289......................... All Other Consumer Goods 15.5 ..............................
Rental.
532310......................... General Rental Centers...... 13.0 ..............................
532411......................... Commercial Air, Rail, and 47.0 ..............................
Water Transportation
Equipment Rental and
Leasing.
532412......................... Construction, Mining, and 42.0 ..............................
Forestry Machinery and
Equipment Rental and
Leasing.
* * * * * * *
----------------------------------------------------------------------------------------------------------------
Sector 54--Professional, Scientific and Technical Services
----------------------------------------------------------------------------------------------------------------
Subsector 541--Professional, Scientific and Technical Services
----------------------------------------------------------------------------------------------------------------
541110......................... Offices of Lawyers.......... 19.0 ..............................
* * * * * * *
541199......................... All Other Legal Services.... 24.5 ..............................
541211......................... Offices of Certified Public 31.5 ..............................
Accountants.
541213......................... Tax Preparation Services.... 26.0 ..............................
[[Page 41272]]
* * * * * * *
541310......................... Architectural Services...... 16.0 ..............................
541320......................... Landscape Architectural 11.0 ..............................
Services.
541330......................... Engineering Services \19\... \19\ 29.0 ..............................
541330 (Exception 1)........... Military and Aerospace \19\ 47.0 ..............................
Equipment and Military
Weapons \19\.
541330 (Exception 2)........... Contracts and Subcontracts \19\ 47.0 ..............................
for Engineering Services
Awarded Under the National
Energy Policy Act of 1992
\19\.
541330 (Exception 3)........... Marine Engineering and Naval \19\ 47.0 ..............................
Architecture \19\.
541340......................... Drafting Services........... 12.0 ..............................
541350......................... Building Inspection Services 12.5 ..............................
541360......................... Geophysical Surveying and 29.0 ..............................
Mapping Services.
* * * * * * *
541380......................... Testing Laboratories and 23.5 ..............................
Services.
541410......................... Interior Design Services.... 11.5 ..............................
541420......................... Industrial Design Services.. 19.5 ..............................
541430......................... Graphic Design Services..... 11.5 ..............................
541490......................... Other Specialized Design 17.0 ..............................
Services.
* * * * * * *
541611......................... Administrative Management 27.0 ..............................
and General Management
Consulting Services.
* * * * * * *
541613......................... Marketing Consulting 19.5 ..............................
Services.
541614......................... Process, Physical 21.0 ..............................
Distribution, and Logistics
Consulting Services.
* * * * * * *
541720......................... Research and Development in 31.0 ..............................
the Social Sciences and
Humanities.
541810......................... Advertising Agencies \10\... \10\ 30.0 ..............................
541820......................... Public Relations Agencies... 20.0 ..............................
541830......................... Media Buying Agencies....... 37.5 ..............................
541840......................... Media Representatives....... 27.0 ..............................
* * * * * * *
541860......................... Direct Mail Advertising..... 23.0 ..............................
541870......................... Advertising Material 36.5 ..............................
Distribution Services.
541890......................... Other Services Related to 20.0 ..............................
Advertising.
541910......................... Marketing Research and 28.0 ..............................
Public Opinion Polling.
541921......................... Photography Studios, 22.5 ..............................
Portrait.
541922......................... Commercial Photography...... 12.0 ..............................
541930......................... Translation and 25.0 ..............................
Interpretation Services.
541940......................... Veterinary Services......... 14.5 ..............................
* * * * * * *
----------------------------------------------------------------------------------------------------------------
Sector 56--Administrative and Support and Waste Management and Remediation Services
----------------------------------------------------------------------------------------------------------------
Subsector 561--Administrative and Support Services
----------------------------------------------------------------------------------------------------------------
561110......................... Office Administrative 15.5 ..............................
Services.
* * * * * * *
561330......................... Professional Employer 47.0 ..............................
Organizations.
561410......................... Document Preparation 20.0 ..............................
Services.
561421......................... Telephone Answering Services 21.5 ..............................
561422......................... Telemarketing Bureaus and 29.5 ..............................
Other Contact Centers.
* * * * * * *
561439......................... Other Business Service 31.5 ..............................
Centers (including Copy
Shops).
561440......................... Collection Agencies......... 27.5 ..............................
561450......................... Credit Bureaus.............. 46.5 ..............................
* * * * * * *
561492......................... Court Reporting and 20.5 ..............................
Stenotype Services.
561499......................... All Other Business Support 26.0 ..............................
Services.
561510......................... Travel Agencies \10\........ \10\ 33.5 ..............................
* * * * * * *
561599......................... All Other Travel Arrangement 35.0 ..............................
and Reservation Services.
[[Page 41273]]
* * * * * * *
561612......................... Security Guards and Patrol 34.0 ..............................
Services.
561613......................... Armored Car Services........ 45.0 ..............................
561621......................... Security Systems Services 30.0 ..............................
(except Locksmiths).
* * * * * * *
561710......................... Exterminating and Pest 19.5 ..............................
Control Services.
* * * * * * *
561730......................... Landscaping Services........ 13.0 ..............................
561740......................... Carpet and Upholstery 11.5 ..............................
Cleaning Services.
561790......................... Other Services to Buildings 10.5 ..............................
and Dwellings.
561910......................... Packaging and Labeling 23.5 ..............................
Services.
561920......................... Convention and Trade Show 23.5 ..............................
Organizers.
561990......................... All Other Support Services.. 20.5 ..............................
----------------------------------------------------------------------------------------------------------------
Subsector 562--Waste Management and Remediation Services
----------------------------------------------------------------------------------------------------------------
* * * * * * *
562991......................... Septic Tank and Related 12.0 ..............................
Services.
* * * * * * *
----------------------------------------------------------------------------------------------------------------
Sector 61--Educational Services
----------------------------------------------------------------------------------------------------------------
Subsector 611--Educational Services
----------------------------------------------------------------------------------------------------------------
611110......................... Elementary and Secondary 22.0 ..............................
Schools.
* * * * * * *
611310......................... Colleges, Universities, and 38.0 ..............................
Professional Schools.
611410......................... Business and Secretarial 25.5 ..............................
Schools.
611420......................... Computer Training........... 22.5 ..............................
611430......................... Professional and Management 17.5 ..............................
Development Training.
611511......................... Cosmetology and Barber 14.0 ..............................
Schools.
611512......................... Flight Training............. 34.5 ..............................
611513......................... Apprenticeship Training..... 15.0 ..............................
* * * * * * *
611610......................... Fine Arts Schools........... 10.5 ..............................
611620......................... Sports and Recreation 12.5 ..............................
Instruction.
611630......................... Language Schools............ 22.0 ..............................
611691......................... Exam Preparation and 17.0 ..............................
Tutoring.
611692......................... Automobile Driving Schools.. 12.0 ..............................
* * * * * * *
611710......................... Educational Support Services 27.5 ..............................
----------------------------------------------------------------------------------------------------------------
Sector 62--Health Care and Social Assistance
----------------------------------------------------------------------------------------------------------------
Subsector 621--Ambulatory Health Care Services
----------------------------------------------------------------------------------------------------------------
621111......................... Offices of Physicians 19.0 ..............................
(except Mental Health
Specialists).
* * * * * * *
621210......................... Offices of Dentists......... 10.5 ..............................
621310......................... Offices of Chiropractors.... 10.0 ..............................
621320......................... Offices of Optometrists..... 11.0 ..............................
621330......................... Offices of Mental Health 10.5 ..............................
Practitioners (except
Physicians).
621340......................... Offices of Physical, 16.0 ..............................
Occupational and Speech
Therapists, and
Audiologists.
621391......................... Offices of Podiatrists...... 10.5 ..............................
621399......................... Offices of All Other 15.0 ..............................
Miscellaneous Health
Practitioners.
621410......................... Family Planning Centers..... 21.5 ..............................
* * * * * * *
621493......................... Freestanding Ambulatory 25.5 ..............................
Surgical and Emergency
Centers.
621498......................... All Other Outpatient Care 28.5 ..............................
Centers.
621511......................... Medical Laboratories........ 42.5 ..............................
621512......................... Diagnostic Imaging Centers.. 22.0 ..............................
[[Page 41274]]
621610......................... Home Health Care Services... 22.5 ..............................
621910......................... Ambulance Services.......... 28.5 ..............................
* * * * * * *
621999......................... All Other Miscellaneous 22.5 ..............................
Ambulatory Health Care
Services.
* * * * * * *
----------------------------------------------------------------------------------------------------------------
Subsector 623--Nursing and Residential Care Facilities
----------------------------------------------------------------------------------------------------------------
* * * * * * *
623210......................... Residential Intellectual and 21.0 ..............................
Developmental Disability
Facilities.
623220......................... Residential Mental Health 21.0 ..............................
and Substance Abuse
Facilities.
* * * * * * *
623312......................... Assisted Living Facilities 26.0 ..............................
for the Elderly.
623990......................... Other Residential Care 19.5 ..............................
Facilities.
----------------------------------------------------------------------------------------------------------------
Subsector 624--Social Assistance
----------------------------------------------------------------------------------------------------------------
624110......................... Child and Youth Services.... 19.0 ..............................
624120......................... Services for the Elderly and 17.0 ..............................
Persons with Disabilities.
624190......................... Other Individual and Family 20.5 ..............................
Services.
624210......................... Community Food Services..... 22.0 ..............................
624221......................... Temporary Shelters.......... 16.0 ..............................
624229......................... Other Community Housing 22.0 ..............................
Services.
624230......................... Emergency and Other Relief 44.5 ..............................
Services.
624310......................... Vocational Rehabilitation 18.0 ..............................
Services.
624410......................... Child Care Services......... 13.0 ..............................
----------------------------------------------------------------------------------------------------------------
Sector 71--Arts, Entertainment and Recreation
----------------------------------------------------------------------------------------------------------------
Subsector 711--Performing Arts, Spectator Sports and Related Industries
----------------------------------------------------------------------------------------------------------------
* * * * * * *
711120......................... Dance Companies............. 21.5 ..............................
711130......................... Musical Groups and Artists.. 18.5 ..............................
711190......................... Other Performing Arts 42.0 ..............................
Companies.
* * * * * * *
711219......................... Other Spectator Sports...... 19.5 ..............................
* * * * * * *
711320......................... Promoters of Performing 32.5 ..............................
Arts, Sports, and Similar
Events without Facilities.
711410......................... Agents and Managers for 23.0 ..............................
Artists, Athletes,
Entertainers, and Other
Public Figures.
711510......................... Independent Artists, 12.0 ..............................
Writers, and Performers.
----------------------------------------------------------------------------------------------------------------
Subsector 712--Museums, Historical Sites and Similar Institutions
----------------------------------------------------------------------------------------------------------------
* * * * * * *
712120......................... Historical Sites............ 21.0 ..............................
* * * * * * *
712190......................... Nature Parks and Other 22.5 ..............................
Similar Institutions.
----------------------------------------------------------------------------------------------------------------
Subsector 713--Amusement, Gambling and Recreation Industries
----------------------------------------------------------------------------------------------------------------
* * * * * * *
713120......................... Amusement Arcades........... 25.0 ..............................
* * * * * * *
713920......................... Skiing Facilities........... 40.0 ..............................
713930......................... Marinas..................... 13.5 ..............................
713940......................... Fitness and Recreational 20.5 ..............................
Sports Centers.
713950......................... Bowling Centers............. 16.0 ..............................
713990......................... All Other Amusement and 12.0 ..............................
Recreation Industries.
----------------------------------------------------------------------------------------------------------------
[[Page 41275]]
Sector 72--Accommodation and Food Services
----------------------------------------------------------------------------------------------------------------
Subsector 721--Accommodation
----------------------------------------------------------------------------------------------------------------
* * * * * * *
721191......................... Bed-and-Breakfast Inns...... 11.0 ..............................
721199......................... All Other Traveler 14.0 ..............................
Accommodation.
721211......................... RV (Recreational Vehicle) 13.5 ..............................
Parks and Campgrounds.
721214......................... Recreational and Vacation 13.0 ..............................
Camps (except Campgrounds).
721310......................... Rooming and Boarding Houses, 19.0 ..............................
Dormitories, and Workers'
Camps.
----------------------------------------------------------------------------------------------------------------
Subsector 722--Food Services and Drinking Places
----------------------------------------------------------------------------------------------------------------
* * * * * * *
722320......................... Caterers.................... 11.0 ..............................
722330......................... Mobile Food Services........ 10.5 ..............................
722410......................... Drinking Places (Alcoholic 11.0 ..............................
Beverages).
722511......................... Full-Service Restaurants.... 13.5 ..............................
722513......................... Limited-Service Restaurants. 16.0 ..............................
* * * * * * *
----------------------------------------------------------------------------------------------------------------
Sector 81--Other Services (Except Public Administration)
----------------------------------------------------------------------------------------------------------------
Subsector 811--Repair and Maintenance
----------------------------------------------------------------------------------------------------------------
811111......................... General Automotive Repair... 10.5 ..............................
811114......................... Specialized Automotive 10.5 ..............................
Repair.
811121......................... Automotive Body, Paint, and 13.5 ..............................
Interior Repair and
Maintenance.
811122......................... Automotive Glass Replacement 21.5 ..............................
Shops.
811191......................... Automotive Oil Change and 14.5 ..............................
Lubrication Shops.
811192......................... Car Washes.................. 13.0 ..............................
811198......................... All Other Automotive Repair 13.5 ..............................
and Maintenance.
* * * * * * *
811310......................... Commercial and Industrial 18.0 ..............................
Machinery and Equipment
(except Automotive and
Electronic) Repair and
Maintenance.
811411......................... Home and Garden Equipment 11.0 ..............................
Repair and Maintenance.
811412......................... Appliance Repair and 25.0 ..............................
Maintenance.
811420......................... Reupholstery and Furniture 10.5 ..............................
Repair.
811430......................... Footwear and Leather Goods 12.0 ..............................
Repair.
811490......................... Other Personal and Household 12.0 ..............................
Goods Repair and
Maintenance.
----------------------------------------------------------------------------------------------------------------
Subsector 812--Personal and Laundry Services
----------------------------------------------------------------------------------------------------------------
812111......................... Barber Shops................ 12.5 ..............................
812112......................... Beauty Salons............... 12.0 ..............................
812113......................... Nail Salons................. 10.0 ..............................
* * * * * * *
812199......................... Other Personal Care Services 10.5 ..............................
812210......................... Funeral Homes and Funeral 15.5 ..............................
Services.
* * * * * * *
812310......................... Coin-Operated Laundries and 16.5 ..............................
Drycleaners.
812320......................... Drycleaning and Laundry 10.0 ..............................
Services (except Coin-
Operated).
* * * * * * *
812910......................... Pet Care (except Veterinary) 10.5 ..............................
Services.
812921......................... Photofinishing Laboratories 33.0 ..............................
(except One-Hour).
* * * * * * *
812990......................... All Other Personal Services. 22.0 ..............................
----------------------------------------------------------------------------------------------------------------
Subsector 813--Religious, Grantmaking, Civic, Professional and Similar Organizations
----------------------------------------------------------------------------------------------------------------
813110......................... Religious Organizations..... 16.0 ..............................
[[Page 41276]]
* * * * * * *
813311......................... Human Rights Organizations.. 34.5 ..............................
813312......................... Environment, Conservation 24.0 ..............................
and Wildlife Organizations.
813319......................... Other Social Advocacy 22.0 ..............................
Organizations.
813410......................... Civic and Social 13.0 ..............................
Organizations.
813910......................... Business Associations....... 19.0 ..............................
813920......................... Professional Organizations.. 27.0 ..............................
813930......................... Labor Unions and Similar 20.5 ..............................
Labor Organizations.
813940......................... Political Organizations..... 16.0 ..............................
813990......................... Other Similar Organizations 18.5 ..............................
(except Business,
Professional, Labor, and
Political Organizations).
* * * * * * *
----------------------------------------------------------------------------------------------------------------
Footnotes:
* * * * * * *
\1\ NAICS code 115310--Support Activities for Forestry--Forest Fire Suppression and Fuels Management Services
are two components of Support Activities for Forestry. Forest Fire Suppression includes establishments which
provide services to fight forest fires. These firms usually have fire-fighting crews and equipment. Fuels
Management Services firms provide services to clear land of hazardous materials that would fuel forest fires.
The treatments used by these firms may include prescribed fire, mechanical removal, establishing fuel breaks,
thinning, pruning, and piling.
\2\ NAICS code 237990--Dredging: To be considered small for purposes of Government procurement, a firm must
perform at least 40 percent of the volume dredged with its own equipment or equipment owned by another small
dredging concern.
* * * * * * *
\8\ NAICS codes 522110, 522130, 522180, and 522210--A financial institution's assets are determined by averaging
the assets reported on its four quarterly financial statements for the preceding year. ``Assets'' for the
purposes of this size standard means the assets defined according to the Federal Financial Institutions
Examination Council 041 call report form for NAICS codes 522110, 522180, and 522210 and the National Credit
Union Administration 5300 call report form for NAICS code 522130.
\9\ NAICS codes 531110, 531120, 531130, and 531190--Leasing of Building Space to the Federal Government by
Owners: For Government procurement, a size standard of $47 million in gross receipts applies to the owners of
building space leased to the Federal Government. The standard does not apply to an agent.
\10\ NAICS codes 488510, 531210, 541810, 561510, 561520, and 561920--As measured by total revenues, but
excluding funds received in trust for an unaffiliated third party, such as bookings or sales subject to
commissions. The commissions received are included as revenues.
* * * * * * *
\12\ NAICS code 561210--Facilities Support Services:
(a) If one or more activities of Facilities Support Services as defined in paragraph (b) (below in this
footnote) can be identified with a specific industry and that industry accounts for 50 percent or more of the
value of an entire procurement, then the proper classification of the procurement is that of the specific
industry, not Facilities Support Services.
(b) ``Facilities Support Services'' requires the performance of three or more separate activities in the areas
of services or specialty trade contractors industries. If services are performed, these service activities
must each be in a separate NAICS industry. If the procurement requires the use of specialty trade contractors
(plumbing, painting, plastering, carpentry, etc.), all such specialty trade contractors activities are
considered a single activity and classified as ``Building and Property Specialty Trade Services.'' Since
``Building and Property Specialty Trade Services'' is only one activity, two additional activities of separate
NAICS industries are required for a procurement to be classified as ``Facilities Support Services.''
\13\ NAICS code 238990--Building and Property Specialty Trade Services: If a procurement requires the use of
multiple specialty trade contractors (i.e., plumbing, painting, plastering, carpentry, etc.), and no specialty
trade accounts for 50 percent or more of the value of the procurement, all such specialty trade contractors
activities are considered a single activity and classified as Building and Property Specialty Trade Services.
* * * * * * *
\15\ NAICS code 513210--For purposes of Government procurement, the purchase of software subject to potential
waiver of the nonmanufacturer rule pursuant to Sec. 121.1203(d) should be classified under this NAICS code.
\16\ NAICS code 611519--Job Corps Centers. For classifying a Federal procurement, the purpose of the
solicitation must be for the management and operation of a U.S. Department of Labor Job Corps Center. The
activities involved include admissions activities, life skills training, educational activities, comprehensive
career preparation activities, career development activities, career transition activities, as well as the
management and support functions and services needed to operate and maintain the facility. For SBA assistance
as a small business concern, other than for Federal Government procurements, a concern must be primarily
engaged in providing the services to operate and maintain Federal Job Corps Centers.
* * * * * * *
\19\ NAICS code 541330--
(a) ``Engineering Services'' means applying physical laws and principles of engineering in the design,
development, and utilization of machines, materials, instruments, structures, processes, and systems. These
may involve any of the following activities: provision of advice, preparation of feasibility studies,
preparation of preliminary and final plans and designs, provision of technical services during the
construction or installation phase, inspection and evaluation of engineering projects, and related services.
(b) Exception 1--Military Equipment, Aerospace Equipment, and Military Weapons: This exception applies when
agencies procure highly specialized engineering services that are specifically and directly related to
military and aerospace platforms, systems, and technologies. This includes work on military equipment, such as
tanks, armored vehicles, drones, missile systems, C4ISR systems, radar and sonar systems, and other tactical
or ground-based technologies. It also includes aerospace systems, such as satellites, launch vehicles,
spacecraft, navigation and propulsion systems, and defense-related aeronautical engineering. Additionally, the
exception covers military weapons and weapon systems, including guns, torpedoes, ballistic missile defense,
nuclear weapons systems, and emerging technologies like directed energy weapons (e.g., lasers). Associated
specialized services, such as systems integration, sustainment engineering, testing and evaluation, tech
refreshes, and modeling/simulation designed for military or aerospace purposes also qualify. This exception is
not limited to military contracts; it can also apply to civilian agencies or commercial efforts that involve
defense-related equipment or applications. However, it excludes standard civil and commercial engineering
services (e.g., roads, bridges, utilities, and facilities), and non-defense aerospace projects.
(c) Exception 2--Contracts and Subcontracts for Engineering Services Awarded Under the National Energy Policy
Act of 1992: This exception applies to contracts and subcontracts for engineering services, as defined in (a)
above, awarded under the National Energy Policy Act of 1992 (NEPA). Section 3021 of NEPA provides that for
purposes of contracts and sub-contracts requiring engineering services, the applicable size standard shall be
that established for military and aerospace equipment and military weapons (106 Stat. 2776; Pub. L. 102-486;
October 24, 1992).
[[Page 41277]]
(d) Exception 3--Marine Engineering and Naval Architecture under NAICS 541330: This exception applies when work
involves highly specialized engineering services that are specifically and directly related to marine vessels
and naval systems. Covered areas include ship and vessel design, such as Navy ships, submarines, Coast Guard
cutters, commercial or military cargo vessels, and special-purpose vessels like icebreakers and autonomous
ships. It also includes marine engineering, such as propulsion and steering systems, HVAC, electrical, fuel,
ballast, and onboard fluid handling systems, as well as the integration of weapons systems and onboard system
modeling. Naval architectural services, such as hull form development, hydrodynamic performance, buoyancy and
stability analysis, weight distribution, seakeeping, and propulsion system design are also included. Also
covered are support services, such as ship modification, modernization, damage control, survivability
engineering, sea trials instrumentation, and assistance with regulatory certifications. Excluded from this
exception are general civil marine structures (e.g., docks, piers, canals), environmental engineering not
related to ships, and architectural services for shipyards or administrative buildings.
Kelly Loeffler,
Administrator.
[FR Doc. 2025-16142 Filed 8-21-25; 8:45 am]
BILLING CODE 8026-09-P