[Federal Register Volume 68, Number 199 (Wednesday, October 15, 2003)]
[Rules and Regulations]
[Pages 59309-59315]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-26036]
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SMALL BUSINESS ADMINISTRATION
13 CFR Part 121
RIN 3245-AF03
Small Business Size Standards; Facilities Support Services
(Including Base Maintenance)
AGENCY: U.S. Small Business Administration (SBA).
ACTION: Final rule.
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SUMMARY: The U.S. Small Business Administration (SBA) is adopting an
increase to the size standard for the Facilities Support Services
industry (North American Industry Classification System (NAICS) code
561210) from $6 million in average annual receipts to $30 million and
increases the size standard for the sub-category of Base Maintenance
from $23 million to $30 million. These increased standards better
define the size of businesses in this industry that the SBA believes
should be eligible for Federal small business assistance programs. This
final rule also changes the title of ``Base Housing Maintenance'' under
NAICS code 238990 to ``Building and Property Specialty Trade Services''
to better identify the type of activities that fall under this
category.
DATES: This rule is effective November 14, 2003.
FOR FURTHER INFORMATION CONTACT: Diane Heal, Program Analyst, Office of
Size Standards, Office of Government Contracting and Business
Development, (202) 205-6618 or [email protected].
SUPPLEMENTARY INFORMATION: On February 3, 2003, the SBA published a
proposed rule in the Federal Register (68 FR 5234) to increase the size
standard for the Facilities Support Services industry (NAICS code
561210) from $6 million in average annual receipts to $30 million and
the size standard for the sub-category of Base Maintenance from $23
million to $30 million. The SBA proposed this increase after reviewing
requests from firms in the Facilities Support Services industry to
review the $6 million size standard for this industry and the $23
million size standard for Base Maintenance, a sub-category of the
industry. These size standards are based on annual receipts of the
business, as described in 13 CFR 121.104. These firms argued that a
size standard increase is warranted to reflect the size of Federal
contracts issued in this industry. These contracts include a broad
spectrum of services involving administrative support, custodial
services, facilities repair and maintenance, and technical services,
which often are $10 million per year or more in value. A small business
can lose its small business status with only one or two contracts.
Costs on these types of contracts have increased greater than the
general inflation rate, especially due to changes in the mandated labor
rates under the Service Contract Act and increased health insurance
costs. The requestors believed that to help develop small businesses to
be competitive with large businesses in this industry, the size
standard should be increased to the $25 million to $30 million range.
Based on these concerns, the SBA conducted a review of this
industry's size standards. In addition to reviewing patterns of Federal
procurement in this industry, it collected and evaluated data on the
industry's structure. This review involved comparisons of average firm
size, the size distribution of firms, measures of start-up costs, and
the degree of concentration of economic activity among very large firms
in the industry. Based on its review of each of these evaluation
factors, and the nature and patterns of Federal contracting for
Facility Support Services, the SBA concluded that the activities
comprising this industry and the characteristics of firms in the
industry no longer support the need for separate size standards for
Base Maintenance and for all other facilities support activities. The
SBA also found that the data supported an increase in the size
standards for all activities comprising Facility Support Services to
$30 million in average annual receipts. (For more information on the
reasons for the proposed size standard increase to $30 million, see the
February 3, 2003, proposed rule, 68 FR 5234).
The SBA received 16 comments on the proposed size standard. After
giving careful consideration to the comments, the SBA has decided to
adopt its proposed size standard of $30 million.
[[Page 59310]]
Discussion of Comments on the Proposed Rule
The SBA received 16 timely comments on the proposed size standard
from various business concerns. Nine commenters supported the proposed
size standard and seven commenters opposed the change. The SBA also
received a recommendation from its Office of Hearings and Appeals (OHA)
to clarify the footnote. Below is a summary of the major issues raised
by the comments received on the proposed rule and the SBA's position on
those issues.
Comments Supporting a Higher Size Standard
Four commenters remarked that increased costs, such as start up
costs, wages, workers compensation, health insurance, fuels, and
materials, have increased their revenues to the point where after two
or three contracts their firms exceed the current size standard. One
commenter pointed out that salary, wages, and taxes are the major costs
and will normally comprise more than 50% of the contract expense. Two
commenters acknowledged that the U.S. Department of Labor's increase in
Service Contract Act wage determinations has had a direct impact on the
costs of Facility Support Services contracts.
The SBA agrees that increased costs have caused small business to
exceed the current size standard with only two or three contracts.
Facility Support Services contracts are larger requirements that
include varied tasks from Base Maintenance to engineering and technical
support. Because of the nature of these requirements, more than two-
thirds of total industry revenues go to large firms at or exceeding the
current size standard. As presented in the preamble of the proposed
rule, industry data on the distribution of revenues by firm size and
other industry characteristics show that firms in the Facilities
Support Services do have high costs and are much larger in size than
firms in most other service industries.
All nine supportive commenters pointed out that the increase in the
size standard would increase competition and participation in Federal
contracts. Two commenters stated that firms growing beyond the $6
million size standard are not ready to compete with large firms. One
commenter stated that the increased size standard would allow firms a
longer period for growth and maturity. One commenter stated that the
increase will secure a future for small businesses in this industry, as
the current size standard limits a firm's ability to serve the Federal
Government.
The SBA agrees that an increase to the size standard will make
small businesses more competitive in this industry. As stated in the
preamble to the proposed rule, the share of Federal contracts awarded
to small businesses supports an increase to the current size standard.
During 1999 to 2001, small businesses accounted for 30.5% of total
industry receipts but these firms received only 12% of the dollar value
of Federal contracts. This is a disproportionate share of Federal
contract dollars relative to industry receipts. Contract requirements
make it difficult for smaller firms to perform on Federal Facilities
Support Services contracts. For example, contracting data show that
two-thirds of small business awards in this industry are made through
programs reserved for small businesses rather than through full and
open competition. The SBA believes that the increase in size standard
will allow firms in this industry to grow to a more competitive size.
Two commenters supported the SBA's proposal to give Facilities
Support Services and Base Maintenance the same size standard. One of
these commenters acknowledged that ``the same companies are likely to
compete for contracts with either designation.''
The SBA agrees with these comments. As stated in the preamble to
the proposed rule, the SBA believes that the activities comprising this
industry and the characteristics of firms in the industry no longer
require separate size standards for Base Maintenance and for all other
facilities support activities. The NAICS 2002 industry description of
Facilities Support Services is very similar to the SBA's description of
Base Maintenance (see footnotes 12 and 13 of the current 13 CFR
121.201). The SBA believes that the firms performing Base Maintenance
services also perform, or have the capability to perform, most other
facilities support activities. Given the close similarity of the
descriptions of Facilities Support Services and Base Maintenance, the
SBA believes that a single size standard is appropriate for all
activities within the Facilities Support Services industry.
The SBA received a recommendation from OHA to clarify the title of
``Base Housing Maintenance,'' an exception to NAICS 238990, ``All Other
Specialty Trade Contractors,'' as it is often confused with ``Base
Maintenance,'' an activity under Facilities Support Services. OHA
suggested that the ``Base Housing Maintenance'' title should be revised
to more accurately reflect the description of that category in Footnote
13.
The SBA agrees with this recommendation and has revised the title
for the exception to NAICS code 238990 from ``Base Housing
Maintenance'' to ``Building and Property Specialty Trade Services.''
This revision is appropriate in this rule making process as it does not
change the meaning of the exception or the size standard for NAICS code
238990. The new title better identifies the activities that fall under
this category.
Comments Opposing a Size Standard Increase
The SBA received four comments which stated that entry costs for
this industry are low and that Facility Support Services contracts are
performed in Government-provided facilities using Government-provided
equipment. Five comments asserted that the increase is detrimental to
emerging small businesses and that it will hinder small business
growth. Four comments stated that the current size standard encourages
large businesses to mentor ``emerging small businesses.''
The SBA does not concur with these comments, and believes that
these comments do not accurately characterize the Facility Support
Services industry. The SBA does recognize that a higher size standard
could have an impact on the smallest businesses in this industry.
However, the smallest firms are usually limited to contracts for one
type of industry or to work as subcontractors. The nature of the
industry and the data presented in the preamble of the proposed rule
show that the Facility Support Services industry is comprised
predominately of larger firms. The industry characteristics show that
start-up costs are high, and that Federal contracts for Facility
Support Services contain varied tasks, including engineering and other
technical support tasks, administrative functions, specialty trade
tasks, and high-end equipment maintenance. Often, after two or three
contracts, firms in this industry find that they have outgrown the
current size standard. In addition, the SBA believes this increase will
expand small business subcontracting opportunities and mentoring with
large businesses. All requirements over $500,000 for Facility Support
Services awarded to large businesses include incentives and goals for
subcontracting with small businesses. The fact that an industry's size
standard is $6 million or $30 million will not have a detrimental
bearing on a large business's plans to subcontract to or mentor a small
[[Page 59311]]
business. The higher size standard would likely encourage more
subcontracting with all small businesses since they would be able to
remain as small subcontractors for a longer period of time and offer
more capabilities to the large business contractor.
The comments received supporting the SBA's actions agree that the
increase is reasonable. They endorsed the SBA's findings that firms are
quickly outgrowing the current size standard, that costs are high, and
that the increase will augment the number of small business set-aside
awards, thereby increasing competition in this industry. This increase
will add to a small business's maturity and encourage small business
growth.
Recommended Alternative Size Standards
One commenter only supported an increase of 50%. However, the
commenter did not provide any data to justify this alternative, nor did
the commenter indicate whether the 50% increase was appropriate for
both the $6 million and $23 million size standards. The SBA can only
assume that the commenter meant 50% of the $6 million size standard,
which equates to $9 million, and 50% of the $23 million which would put
the size standard above $30 million.
One commenter recommended a $12 million size standard. This
commenter stated that $12 million will enable small businesses
additional opportunities within the Facilities Support Services
industry without forcing emerging small businesses to compete against
larger firms.
The SBA disagrees with both of these alternatives. Neither an
increase to $9 million or $12 million would be representative of the
overall characteristics of firms in the industry, nor would either
alternative provide competition and growth for small businesses. In
addition, Federal contract award data show that firms under the current
$23 million size standard have only been able to obtain a relatively
small share of Facilities Support Services contracts.
Non-Related Comments
One commenter pointed out that the increase in bundled contracts
has caused Federal agencies to contract with larger firms. This
commenter called for a 12 month moratorium on any changes so that the
effect of combining contracts and its impact on small businesses can be
further analyzed.
One commenter alleged that all mid-sized businesses are 8(a) firms
and alleges that 8(a) certification is being abused. Another commenter
stated that the 8(a) program (13 CFR 124) and the HUBZone program (13
CFR 126) usually serve the same companies and that the success rate of
companies after graduating from the 8(a) program will be hampered by
this increase.
The issues regarding the SBA's 8(a) and HUBZone programs concern
program policy, and the issues concerning contract bundling relate to
the structuring of individual procurements and therefore are separate
from the SBA's determination of the appropriate small business size
standard for a particular industry. For more information about the
SBA's efforts to address the impact of contract bundling on small
businesses, see the recently proposed rule on this issue (68 FR 5134,
dated January 31, 2003).
One commenter stated that the definition of a small business is
causing problems with emerging businesses, as it relates to the current
set of NAICS codes for the Information Technology industry, which are
``$6 million and $21 million.'' This commenter emphasized that emerging
small businesses cannot compete with firms that produce $21 million in
revenues. This commenter recommended that there be a category to
identify mid-sized businesses.
This comment does not relate specifically to the SBA's proposal to
increase the size standard for Facilities Support Services. The
commenter refers to the size standard of $6 million and $21 million for
the Information Technology industry. With respect to that industry, the
SBA published a proposed rule that would create a separate size
standard for Information Technology Value Added Resellers (67 FR 48479,
July 24, 2002). Additionally, the size standards are intended to define
only small businesses, not a separate category of mid-size firms.
Compliance With Executive Orders 12866, 12988, and 13132; the
Regulatory Flexibility Act (5 U.S.C. 601-612); and the Paperwork
Reduction Act (44 U.S.C. Ch. 35)
The Office of Management and Budget (OMB) has determined that this
rule is a significant regulatory action for purposes of Executive Order
12866 because size standards determine which businesses are eligible
for Federal small business programs. This is not a major rule under the
Congressional Review Act, 5 U.S.C. 800. For the purpose of the
Paperwork Reduction Act, 44 U.S.C. Ch. 35, the SBA has determined that
this rule would not impose new reporting or recordkeeping requirements.
For purposes of Executive Order 13132, the SBA has determined that this
rule does not have any federalism implications warranting the
preparation of a Federalism Assessment. For purposes of Executive Order
12988, the SBA has determined that this rule is drafted, to the extent
practicable, in accordance with the standards set forth in that order.
Our Regulatory Impact Analysis follows.
Regulatory Impact Analysis
1. Is There a Need for This Regulatory Action?
The SBA is chartered to aid and assist small businesses through a
variety of financial, procurement, business development, and advocacy
programs. To effectively assist the intended beneficiaries of these
programs, the SBA must establish distinct definitions of which
businesses are deemed small businesses. The Small Business Act (15
U.S.C. 632(a)) delegates to the SBA Administrator the responsibility
for establishing small business definitions. The Act also requires that
small business definitions vary to reflect industry differences. The
supplementary information to the final rule explains the approach the
SBA follows when analyzing a size standard for a particular industry.
Based on that analysis, the SBA believes that a change in the
Facilities Support Services size standard is needed to better reflect
small businesses in this industry.
2. What Are the Potential Benefits and Costs of This Regulatory Action?
The most significant benefit to businesses obtaining small business
status as a result of this rule will be eligibility for Federal small
business assistance programs. Under this rule, 177 additional firms may
obtain small business status and become eligible for these programs. Of
these 177, 19 are between the current $23 million Base Maintenance size
standards and the $30 million proposed size standard. These programs
include the SBA's financial assistance programs, economic injury
disaster loans (EIDL), and Federal procurement preference programs for
small businesses, 8(a) firms, small disadvantaged businesses (SDB),
small businesses located in Historically Underutilized Business Zones
(HUBZone), as well as those awarded through full and open competition
after application of the HUBZone or SDB price evaluation adjustment.
Through the assistance of these programs, small businesses may benefit
by becoming more knowledgeable, stable, and competitive businesses.
Other Federal agencies also use the SBA's size standards for their
programs
[[Page 59312]]
for a variety of regulatory and program purposes. The SBA does not have
information on each of these uses sufficient to evaluate the impact of
the size standard change. If an agency believes that a different size
standard is appropriate for its programs, it must contact the SBA. If
an agency is seeking to change size standards in a general rulemaking
context, then the agency should contact the SBA's Office of Size
Standards (13 CFR 121.901-904). If the agency is seeking to change size
standards for the purposes of a Regulatory Flexibility Act (RFA)
analysis then the SBA's Office of Advocacy should be contacted pursuant
to section 601(3) of the RFA. Section 601(3) of the RFA requires the
agency to consult with the Office of Advocacy and provide an
opportunity for public comment when using a different size standard for
the RFA analysis.
The benefits of a size standard increase to a more appropriate
level would affect three groups: (1) Businesses that benefit by gaining
small business status from the proposed size standard and use small
business assistance programs; (2) growing small businesses that may
exceed the current size standard in the near future and who will retain
small business status under the proposed size standard; and (3) Federal
agencies that award contracts under procurement programs that require
small business status.
Newly defined small businesses would benefit from the SBA's 7(a)
Guaranteed Loan Program. The SBA estimates that approximately $2.5
million to $5.5 million in new Federal loan guarantees could be made to
these newly defined small businesses. Because of the $2 million maximum
size of the SBA 7(a) loan guarantees, most loans are made to small
businesses well below the size standard. Thus increasing the size
standard will likely result in a smaller increase in guaranteed loans
to small businesses than the estimated range. These additional loan
guarantees, because of their limited magnitude, will have virtually no
impact on the overall availability of loans for the SBA's loan
programs, which have averaged about 40,000 loans totaling about $10
billion per year in recent years.
The newly defined small businesses would also benefit from the
SBA's economic injury disaster loan program. Since this program is
contingent upon the occurrence and severity of a disaster, no
meaningful estimate of benefits can be projected.
The SBA estimates that firms gaining small business status could
potentially obtain Federal contracts worth $65 million to $95 million
under the small business set-aside program, the 8(a), SDB, and HUBZone
programs, or unrestricted contracts. This estimate is based on an
analysis of small business participation in Federal contracting and the
industry market share of businesses between the current and proposed
size standards. During fiscal years 1999-2001, small businesses
obtained 11.8% of Facilities Support Services contract dollars out of
approximately $12 billion in total Federal Facilities Support Services
contracts. About two-thirds of small business awards were made as small
business set-aside or 8(a) contracts. Most Facilities Support Services
contracts are for Base Maintenance services, which has a $23 million
size standard. Businesses between $23 million and $30 million account
for 3.6% of industry sales.
Federal agencies may benefit from the higher size standards if the
newly defined and expanding small businesses compete for more set-aside
procurements. The larger base of small businesses would likely increase
competition and would lower the prices on set-aside procurements. A
large base of small businesses may create an incentive for Federal
agencies to set aside more procurements creating greater opportunities
for all small businesses. Small business opportunities will be enhanced
in open procurements as they gain experience in Federal contracting
through the set-aside and other small business procurement preference
programs. Large businesses with small business subcontracting goals may
also benefit from a larger pool of small businesses by enabling them to
better achieve their subcontracting goals and obtain lower subcontract
prices. No estimate of cost savings from these contracting decisions
can be made since data are not available to directly measure price or
competitive trends on Federal contracts.
To the extent that 177 additional firms become active in Government
programs, this may entail some additional administrative costs to the
Federal Government associated with additional bidders for Federal small
business procurement programs, additional firms seeking access to the
SBA guaranteed lending programs, and additional firms eligible for
enrollment in the SBA's PRO-Net data base program. Among businesses in
this group seeking the SBA's assistance, there will be some additional
costs associated with compliance and verification associated with
certification of small business status and protests of small business
status. These costs are likely to generate minimal incremental costs
since mechanisms are currently in place to handle these administrative
requirements.
The costs to the Federal Government may be higher on some Federal
contracts. With greater number of businesses defined as small, Federal
agencies may choose to set-aside more contracts for competition among
small businesses rather than using full and open competition. The
movement from unrestricted to set-aside contracting is likely to result
in competition among fewer bidders. Also, higher costs may result if
additional full and open contracts are awarded to HUBZone and SDB
businesses as a result of a price evaluation preference. The additional
costs associated with fewer bidders, however, are likely to be minor
since, as a matter of policy, procurements may be set aside for small
businesses or reserved for the 8(a) or HUBZone Programs only if awards
are expected to be made at fair and reasonable prices.
The proposed size standard may have distributional effects among
large and small businesses. Although the actual outcome of the gains
and losses among small and large businesses cannot be estimated with
certainty, several trends are likely to emerge. First, there will
likely be a transfer of some Federal contracts to small businesses from
large businesses. Large businesses may have fewer Federal contract
opportunities as Federal agencies decide to set aside more Federal
procurements for small businesses. Also, some Federal contracts may be
awarded to HUBZone or SDB concerns instead of large businesses since
those two categories of small businesses may be eligible for a price
evaluation adjustment for contracts competed on a full and open basis.
Similarly, currently defined small businesses may obtain fewer Federal
contacts due to the increased competition from more businesses defined
as small. This transfer may be offset by a greater number of Federal
procurements set aside for all small businesses. The number of newly
defined and expanding small businesses that are willing and able to
sell to the Federal government will limit the potential transfer of
contracts away from large and currently defined small businesses. The
potential distributional impacts of these transfers may not be
estimated with any degree of precision because the data on the size of
business receiving a Federal contract are limited to identifying small
or other-than-small businesses, without regard to the exact size of the
business.
The revision to current size standards for Facilities Support
Services is consistent with the SBA's statutory
[[Page 59313]]
mandate to assist small businesses. This regulatory action promotes the
Administrator's objectives. One of the SBA's goals in support of the
Administrator's objectives is to help individual small businesses
succeed through fair and equitable access to capital and credit,
Government contracts, and management and technical assistance.
Reviewing and modifying size standards when appropriate ensures that
intended beneficiaries have access to small business programs designed
to assist them. Size standards do not interfere with state, local, and
tribal governments in the exercise of their government functions. In a
few cases, state and local governments have voluntarily adopted the
SBA's size standards for their programs to eliminate the need to
establish an administrative mechanism for developing their own size
standards.
Final Regulatory Flexibility Analysis
Under the RFA, this rule may have a significant impact on a
substantial number of small entities. This rule may impact small
entities in two ways. The SBA estimates that an additional 177
businesses may obtain small business status as a result of this rule.
Also small businesses may obtain an additional $65 to $95 million in
Federal contracts.
The size standard may also affect small businesses participating in
programs of other agencies that use the SBA size standards. As a
practical matter, the SBA cannot fully estimate the impact of a size
standard change on each and every Federal program that uses its size
standards. In cases where an SBA's size standard is not appropriate,
the Small Business Act and the SBA's regulations allow Federal agencies
to develop different size standards with the approval of the SBA
Administrator (13 CFR 121.902). For purposes of a regulatory
flexibility analysis, agencies must consult with the SBA's Office of
Advocacy when developing different size standards for their programs.
Immediately below, the SBA sets forth a final regulatory
flexibility analysis (FRFA), addressing the need for and objective of
the rule; description and estimate of the number of small entities to
which the rule will apply; the projected reporting, recordkeeping, and
other compliance requirements of the rule; the relevant Federal rules
which may duplicate, overlap or conflict with the final rule; and
alternatives to the final rule considered by the SBA that minimize the
impact on small businesses.
(1) What Is the Need for and Objective of the Rule?
The revision to the size standards for Facilities Support Services
more appropriately defines the size of businesses in these industries
that the SBA believes should be eligible for Federal small business
assistance programs. A review of the latest available industry data
supports a change to the size standard.
(2) What Significant Issues Were Raised by the Public Comments in
Response to the Initial Regulatory Flexibility Act (IRFA)?
The SBA received no comments in response to the IRFA of this rule.
(3) What Is the SBA's Description and Estimate of the Number of Small
Entities to Which the Rule Will Apply?
Within the Facilities Support Services industry, 896 out of 1,219
businesses are currently small. With the adoption of this rule, the SBA
estimates that 177 additional businesses out of 1,219 firms will be
considered small. Of these 177, 19 are between the current $23 million
Base Maintenance size standards and the new $30 million size standard.
These businesses will be eligible to seek available SBA assistance
provided that they meet other program requirements. As a result of this
rule, businesses becoming eligible for SBA assistance cumulatively will
generate approximately $25.8 billion out of a total of $75.8 billion in
receipts, or 34.1% of industry receipts. The small business coverage in
the Facilities Support Services industry will increase by 3.6% of total
receipts.
(4) Will This Rule Impose Any Additional Reporting or Recordkeeping
Requirements on Small Businesses?
A new size standard does not impose any additional reporting,
recordkeeping or other compliance requirements on small entities for
the SBA programs. A change in a size standard would not create
additional costs on a business to determine whether or not it qualifies
as a small business. A business needs to only examine existing
information to determine its size, such as Federal tax returns, payroll
records, and accounting records. Size standards determine ``voluntary''
access to the SBA and other Federal programs that assist small
businesses, but do not impose a regulatory burden as they neither
regulate nor control business behavior. In addition, this rule does not
impose any new information collecting requirements from the SBA which
requires approval by OMB under the Paperwork Reduction Act of 1980, 44
U.S.C. 3501-3520.
(5) What Are the Steps the SBA Has Taken To Minimize the Significant
Economic Impact on Small Business?
Most of the economic impact on small businesses will be positive.
The most significant benefits to businesses that will obtain small
business status as a result of this final rule are (1) eligibility for
the Federal Government's procurement preference programs for small
businesses, 8(a) firms, SDBs, and businesses located in HUBZones; and
(2) eligibility for the SBA's financial assistance programs such as
7(a) business loans, 504 business loans, and EIDL assistance. The SBA
estimates that firms gaining small business status could potentially
obtain Federal contracts worth $65 million to $95 million per year
under the small business set-aside programs, the 8(a) program, the
HUBZone program, or unrestricted contracts. This represents less than
1% of the $12 billion in total Federal expenditures for Facility
Support Services. The SBA estimates that approximately $2.5 million to
$5.5 million in new Federal loan guarantees could be made to these
newly defined small businesses. Because of the $2 million maximum size
of the SBA 7(a) loan guarantees, most loans are made to small
businesses well below the size standard.
(6) Alternatives
(a) What Alternatives Will Allow the Agency To Accomplish Its
Regulatory Objectives While Minimizing the Impact on Small Entities?
As stated in the Small Business Act, 15 U.S.C. 632, and 13 CFR part
121, the SBA establishes size standards based on industry
characteristics and for non-manufacturing concerns on the basis of
gross receipts of a business concern over a period of 3 years. The
SBA's research showed that Facility Support Services contracts include
a broad spectrum of services involving administrative support,
custodial services, janitorial, facilities repair and maintenance, and
technical services. The size standards for many of these industries,
such as security guard services, janitorial services, and technical
support for navigational waterways and military weapons systems, are
well in excess of $6 million. Contract costs often are $10 million per
year or more in value. A small business can lose its small business
status with only one or two contracts. Costs on these types of
contracts have increased greater than the general inflation rate,
especially due
[[Page 59314]]
to changes in the mandated labor rates under the Service Contract Act
and increased health insurance costs.
The SBA's review of these issues and data on the Facilities Support
Services industry, as described in the February 3, 2003, proposed rule,
support increasing the size standard to $30 million.
(b) What Alternatives Did the SBA Reject?
One commenter opposed to any increase except an increase of 50%,
but no data was provided to justify this alternative. The commenter did
not state 50% of which current size standard, $6 million or $23
million. The SBA can only assume that the commenter meant 50% of the $6
million size standard, which equates to $9 million. A 50% increase to
the $23 million would put the size standard above $30 million.
One commenter recommended a $12 million size standard. This
commenter stated that $12 million will enable small businesses
additional opportunities within the Facilities Support Services
industry without forcing emerging small businesses to compete against
larger firms.
The SBA rejects both of these alternatives. Neither an increase to
$9 million or $12 million would be representative of this industry, nor
would either alternative provide competition and growth for small
businesses. The industry data provided in the preamble to the proposed
rule show that all of the characteristics measured firms in the
Facilities Support Services industry were much larger than firms in
most nonmanufacturing industries. This finding supports a size standard
at the highest receipts levels. In addition, Federal contract award
data show that firms under the current $23 million size standard have
only been able to obtain a relatively small share of Facilities Support
Services contracts.
List of Subjects in 13 CFR Part 121
Administrative practice and procedure, Government procurement,
Government property, Grant programs-business, Loan programs-business,
Small businesses.
0
For the reasons stated in the preamble, amend part 121 of title 13 Code
of Federal Regulations as follows:
PART 121--SMALL BUSINESS SIZE REGULATIONS
0
1. The authority citation of part 121 continues to read as follows:
Authority: 15 U.S.C. 632(a), 634(b)(6), 637(a), 644(c) and
662(5) and Sec. 304, Pub. L. 103-403, 108 Stat. 4175, 4188.
0
2. Amend Sec. 121.201 as follows:
0
a. In the table ``Small Business Size Standards by NAICS Industry,''
under the heading NAICS Subsector 238, ``Specialty Trade Contractors,''
revise the entry for 238990; and under the heading NAICS Subsector 561,
``Administrative and Support Services,'' revise the entry for 561210,
to read as follows; and,
0
b. Revise footnotes 12 and 13 to read as follows:
Small Business Size Standards by NAICS Industry
----------------------------------------------------------------------------------------------------------------
Size standards in Size standards in
NAICS codes NAICS U.S. industry title millions of dollars number of employees
----------------------------------------------------------------------------------------------------------------
Subsector 238--Specialty Trade Contractors
----------------------------------------------------------------------------------------------------------------
* * * * * * *
238990............................ All Other Specialty Trade $12.0 ...................
Contractors.
Except, Building and Property \13\ 12.0 ...................
Specialty Trade Services \13\.
* * * * * * *
-----------------------------------
Subsector 561--Administrative and Support Services
----------------------------------------------------------------------------------------------------------------
* * * * * * *
561210............................ Facilities Support Services \12\.. \12\ 30.0 ...................
----------------------------------------------------------------------------------------------------------------
\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% 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% 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.
[[Page 59315]]
Dated: August 20, 2003.
Hector V. Barreto,
Administrator.
[FR Doc. 03-26036 Filed 10-14-03; 8:45 am]
BILLING CODE 8025-01-P