[Federal Register Volume 68, Number 248 (Monday, December 29, 2003)]
[Rules and Regulations]
[Pages 74842-74847]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-31794]


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SMALL BUSINESS ADMINISTRATION

13 CFR Part 121

RIN 3245-AE78


Small Business Size Standards; Testing Laboratories

AGENCY: U.S. Small Business Administration (SBA).

ACTION: Final rule.

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SUMMARY: The U.S. Small Business Administration (SBA) is adopting the 
proposed increase to the size standard for the Testing Laboratories 
industry (North American Industry Classification System (NAICS) code 
541380) from $6 million to $10 million in average annual receipts. This 
action will better define the size of businesses in this industry that 
the SBA believes should be eligible for Federal small business 
assistance programs.

DATES: This rule is effective January 28, 2004.

FOR FURTHER INFORMATION CONTACT: Robert N. Ray, Office of Size 
Standards, at (202) 205-6618 or [email protected].

SUPPLEMENTARY INFORMATION: On April 9, 2002, the SBA issued a proposed 
rule in the Federal Register (67 FR 17020) to increase the size 
standard for the Testing Laboratories industry (NAICS 541380) from $6 
million to $10 million in average annual receipts (available at http://www.sba.gov/size/indexwhatsnew.html). The SBA proposed this size 
standard after receiving requests from testing laboratories to review 
the $6 million size standard for that industry in light of upgraded 
capacities and skills that Federal agencies have recently required 
among contractors that specialize in environmental and radiochemical 
testing. The requesting testing laboratories claimed that these minimum 
requirements have raised the costs of doing business in this industry, 
and reduced the pool of eligible small testing laboratories capable of 
satisfying these requirements. If this trend persists, they maintain, 
Federal agencies could be hampered in using Government preference 
programs designed to assist small testing laboratories.
    Based on these concerns, the SBA conducted a review of this 
industry's size standard. In addition to reviewing patterns of Federal 
procurement in this industry, the SBA evaluated data on the industry 
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 activity among very large firms in the industry. 
Based on its review of each evaluation factor, and the amount of 
participation of small testing laboratories in Federal Government 
procurement, the SBA concluded that the data supported a size standard 
in this industry of $10 million in average annual receipts. (For more 
detailed information on the reasons for proposing a $10 million size 
standard see the April 9, 2002, (67 FR 17020) proposed rule.) After 
careful consideration of the comments received on the proposed rule, 
the SBA has decided to adopt the proposed size standard of $10 million.

Discussion of Comments on the Proposed Rule

    The SBA received 35 comments on the proposed rule after extending 
the comment period through September 30, 2002 (67 FR 56966, September 
6, 2002). Of the 35 commentators, 21 supported the proposed increase, 
while 14 opposed it. Below is a summary of the major issues raised by 
the comments and the SBA's response.

[[Page 74843]]

Comments Supporting the Proposed Increase to $10 Million

    The 21 comments in favor of the proposed rule raised a number of 
issues in support of a higher size standard. The most important issue 
discussed was the requirements contained in Federal contracts. Six 
commentators cited a pattern of increased Government requirements in 
recent years as leading to the result in which testing laboratories 
under the present size standard of $6 million often cannot adequately 
perform on a Federal contract. These Federal Government requirements 
for laboratory operations include: reporting requirements, quality 
assurance plans, emergency contingency plans, analytical requirements, 
electronic data deliverable requirements, audit requirements, 
management costs, health and safety requirements, regulatory 
requirements and insurance and liability requirements. In addition, 
radioactive and non-radioactive hazards often required testing by 
environmental radiochemistry laboratories that have the licenses, 
procedures, insurance protection, and approvals for both types of 
hazardous samples. Therefore, the general belief among these 
commentators is that large capital and labor expenses are required for 
a testing laboratory to be active as a successful Federal contractor. 
These commentators believed that the size standard should be raised so 
that more Federal contracts will be set aside for small businesses, and 
there will be a larger pool of small testing laboratories to compete 
for those contracts.
    Three commentators cited a recent pattern of increasing 
consolidation in the industry as one or more very large testing 
laboratories have acquired a number of smaller testing laboratories, 
while competing testing laboratories have gone out of business. They 
claimed that this trend has resulted in greater concentration in the 
industry, and less ability for small testing laboratories to compete 
for Federal contracts.
    Two commentators, both large firms, supported the higher size 
standard because they have found it difficult to find competent small 
testing laboratories to meet their Federal subcontracting goals under 
the present size standard. A higher size standard would immediately 
qualify more testing laboratories as small, while permitting additional 
small testing laboratories to expand in size and still be qualified as 
small.
    Finally, two commentators believed that a higher size standard 
would allow them to expand. These commentators contended that the 
present size standard tends to frustrate growth and reduce competition.

Comments Opposing the Proposed Increase

    The strongest criticism of the proposed increase focused on the 
claim that testing laboratories in the $6 million to $10 million size 
range are relatively successful and well capitalized compared to 
testing laboratories with less than $6 million in sales. Eight of the 
14 commentators opposing the proposed change asserted that testing 
laboratories in this size range are too successful to be considered 
small. They indicated that these larger testing laboratories have lower 
costs than smaller testing laboratories due to higher volume. They also 
view larger laboratories as better able to target Federal contracts. A 
common observation is that testing laboratories in the $6 million to 
$10 million size range have larger facilities than smaller testing 
laboratories, and that Federal contracts are often awarded on the basis 
of individual facility qualifications. Four commentators believed that 
a higher size standard would give significant advantages to the large, 
single-site testing laboratories when competing for Federal contracts.
    Commentators opposing the proposed change also generally believed 
that there is a stagnant market for Federal contracts and that 
increasing the size standard in such an environment would increase 
competition for Federal contracts. This additional competition would 
have a negative impact on testing laboratories that are presently under 
the $6 million size standard.
    The comments opposing the proposed size standard also raised an 
issue regarding the performance of small testing laboratories on 
subcontracts awarded by large businesses in fulfillment of 
subcontracting goals on Federal contracts. They contended that small 
testing laboratories are very successful and competitive in obtaining 
subcontracts, and thus, a higher size standard was not needed. One 
comment provided data on such subcontracts awarded by several large 
businesses. These data indicated that small testing laboratories were 
able to achieve a higher proportion of subcontracts than Federal 
contracts.
    Other commentators opposing the proposed change cited information 
in two key areas identified in the proposed rule as reasons supporting 
an increase in the size standard. First, three commentators noted that 
the trend toward consolidation in the industry was associated with one 
or more very large companies buying out smaller, less successful, 
testing laboratories. These commentators recognized that there has been 
a shakeup in the industry, with smaller testing laboratories often 
unsuccessfully competing with very large testing laboratories for 
Federal Government contracts. Second, three commentators also contended 
that recent Federal Government requirements have tended to reduce the 
pool of small testing laboratories that can effectively bid on Federal 
contracts. They viewed these developments as reasons for retaining the 
current size standard rather than supporting an increase.

Response to Significant Issues Raised by Comments

    The SBA believes that the trends in the Testing Laboratories 
industry and the level of small business participation in Federal 
contracting support a size standard higher than $6 million and the 
adoption of the proposed $10 million size standard. Since the time of 
the proposed rule, Federal contracting data have become available for 
fiscal years (FY) 2001-02. These data show small testing laboratories 
have increased their level of participation in Federal contracting over 
previous years. Small testing laboratories obtained 23.1% of testing 
contract dollars in FY 2002, and 29.7% in FY 2001. However, these 
levels remain significantly below the small business share of 44% of 
total industry revenues. The SBA found in a detailed review of fiscal 
years 2001-02 Federal testing contracts that small testing laboratories 
are successful in obtaining contracts of varying sizes. However, the 
consistent discrepancy between the Federal and industry share does lend 
credence to the arguments advanced by the comments supporting the 
proposed size standard that Federal contract requirements have become 
more restrictive in recent years, and that this pattern favors larger, 
more heavily capitalized firms. The SBA also agrees with the view that 
the industry has become more concentrated over time with a much greater 
presence of very large testing laboratories. In 1997, $3.1 billion out 
of $6.4 billion in sales were generated by testing laboratories with 
more than $10 million in sales. This share, almost 50%, has probably 
increased significantly with the recent consolidation in the industry 
and the departure of small testing laboratories. The SBA believes that 
these patterns of more stringent contracting requirements and greater 
industry concentration support a higher size standard.
    The SBA is aware that firms that are larger in size will often 
possess greater

[[Page 74844]]

capabilities than smaller firms. This pattern occurs in most 
industries. Regardless of where a size standard is established, there 
will be a variation in firm size and capabilities within the pool of 
eligible small businesses and this variation will generally favor 
larger firms in the distribution. However, Federal contract 
requirements vary from procurement to procurement, and there is no 
certainty that firms with less than $6 million in sales will be unable 
to compete with firms in the $6 million to $10 million range for most 
contracts. The SBA is concerned that small testing laboratories under 
the current $6 million size standard need to be able to grow to a 
larger size to capably handle Federal testing requirements and to 
develop a stronger competitive base before they grow beyond the size 
standard.
    The SBA does not agree that subcontract awards to small testing 
laboratories should be used as a basis to retain the current size 
standard. Subcontract awards by industry activity on Federal contracts 
are not reported by large businesses. Without a systematic collection 
of testing subcontract data, the SBA is unable to adequately assess the 
implications of Federal subcontracting on the size standard. In 
addition, the SBA received comments from two large businesses 
supporting the proposed size standard because they were experiencing 
difficulty in finding capable small testing laboratories to satisfy 
their testing requirements. The SBA believes that the industry data 
offer an alternative to considering Federal subcontracting trends. 
These data reflect the amount of revenues obtained by testing 
laboratories from all sources. As discussed in this rule and the 
proposed rule, the SBA has concluded that data on the characteristics 
of testing laboratories support the proposed size standard.

Explanation of Revised and Updated Federal Contracting Data

    Comments expressed a concern about the accuracy of the Federal 
procurement data discussed in the proposed rule. In table 3 of the 
proposed rule, a formatting error occurred that showed the Federal 
testing contract data in thousands of dollars instead of millions of 
dollars. The table below shows the correct data as well as the recently 
available contract data for fiscal years 2001-02.

                          Small Business Prime Contract Awards, Fiscal Years 1998-2002
                                          [Data in millions of dollars]
----------------------------------------------------------------------------------------------------------------
                         Category                           FY 1998    FY 1999    FY 2000    FY 2001    FY 2002
----------------------------------------------------------------------------------------------------------------
Testing laboratories awards..............................     $861.6     $628.0      $84.7     $176.7     $233.7
Small testing laboratories awards........................      $44.1      $45.3      $42.1      $52.5      $54.0
Percent to small testing laboratories....................       5.1%       7.2%      49.7%      29.7%     23.1%
----------------------------------------------------------------------------------------------------------------
Source: Federal Procurement Data Center, U.S. General Services Administration.
Note: Data for FY 2000 for Testing Laboratories are not representative of most years due to deobligations of
  $135 million from procurements initiated in previous years.

    The concerns regarding the Federal contracting data also questioned 
the overall quality of the testing contracts reported. While a certain 
degree of error exists with all large databases, the SBA believes the 
data collected by the Federal Procurement Data System (FPDS), the 
official database on Federal contract award information, satisfactorily 
reports the overall level of Federal testing contracts and the amount 
of contracting to various organizational categories. FPDS collects 
detailed information on all Federal contracts with a value of $25,000 
or more. The table above shows data on Federal contracts for testing 
services as evidenced by the assignment of an industry code for the 
testing laboratories industry (NAICS 541380 and SIC 8734). For these 
contracts, testing comprises the predominate activity of the contract. 
The dollar amounts reported show that amount of funds obligated to a 
contract within a fiscal year. That is, for a contract that is more 
than 1 year in duration, the amount of funds spent in a fiscal year are 
reported rather than the entire anticipated dollar value of the 
contract in the year awarded. For indefinite delivery/indefinite 
quantity contracts, only amounts actually awarded through a task order 
are reported, not potential amounts. The SBA recognizes that testing 
may be included within other Federal contracts; however, no method 
exists to accurately identify those contracts. Further, testing would 
tend to comprise only a minor part of those contracts. The SBA does not 
believe that those contracts have a bearing on the size standard for 
testing laboratories.

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

    The Office of Management and Budget (OMB) has determined that this 
final rule is a significant regulatory action for purposes of Executive 
Order 12866. Size standards determine which businesses are eligible for 
Federal small business programs. This is not a major rule, however, 
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 record keeping 
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 the 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 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. It also requires that 
small business definitions vary to reflect industry differences (the 
Small Business Act is available at http://www.sba.gov/library/lawroon.html). The preamble of the proposed rule explained the approach 
the SBA follows when analyzing a size standard for a particular 
industry. Based on that analysis, and comments received on the proposed 
rule, the SBA believes

[[Page 74845]]

that a revision to the current size standard for testing laboratories 
is needed to better define 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 is eligibility for Federal small 
business assistance programs. Under this rule, 120 additional firms 
generating 9.9% of sales in this industry would obtain small business 
status and could be eligible for these programs. These programs include 
the SBA's financial assistance programs, economic injury disaster loans 
and Federal procurement preference programs for small businesses, 8(a) 
firms, small disadvantaged businesses (SDB), and small businesses 
located in Historically Underutilized Business Zones (HUBZones). 
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 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. (See 13 CFR 121.901-904. The SBA's 
regulations are available at http://www.sba.gov/library/lawroon.html.) 
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 the RFA (5 U.S.C. 603(a)), 
available at http://www.sba.gov/advo/laws/regflex.html). 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 from the higher size standard; and (3) Federal 
agencies that award contracts under procurement programs that require 
small business status.
    Newly defined small businesses could benefit from the SBA's 7(a) 
Guaranteed Loan Program. The SBA estimates that approximately $2 
million in new Federal loan guarantees would be made to these newly 
defined small businesses. This represents approximately 9.9% of the 
annual average of $19 million in loans that were guaranteed by the SBA 
under this financial program to testing laboratories firms during 
fiscal years 1998-2002. Because of the size of the loan guarantees, 
most loans are made to small businesses well below the size standard. 
Thus, increasing the size standard will likely result in only a small 
increase in small business guaranteed loans to testing laboratories, 
and the $2 million estimated figure may overstate the actual impact.
    The newly defined small businesses would also benefit from the 
SBA's Economic Injury Disaster Loan (EIDL) program. Since this program 
is contingent upon the occurrence and severity of a disaster, however, 
no meaningful estimate of benefits can be projected.
    The SBA estimates that firms gaining small business status could 
potentially obtain Federal contracts worth an additional $42 million in 
sales. This represents 9.9% of approximately $424 million that the 
Federal Government awarded per year in this industry during fiscal 
years 1998-2002.
    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 
larger base of small businesses may create an incentive for Federal 
agencies to set aside more contracts, resulting in greater 
opportunities for all small businesses. Small business opportunities 
will be enhanced in full and open procurements as newly eligible firms 
gain experience in Federal contracting through 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 at lower 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 up to 120 additional firms could become active 
in Federal Government small business programs, this may entail some 
additional administrative costs to the Federal Government associated 
with additional bidders for Federal procurements, additional firms 
seeking assistance from the SBA's guaranteed lending programs, and 
additional firms eligible for enrollment in the SBA's PRO-Net database 
program. Among businesses in this group seeking the SBA's assistance, 
there will be some additional costs associated with compliance, 
protests, and verification 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 a 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 full and open to set-aside contracting is likely to 
result in competition among fewer bidders for a contract. 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 and 
price evaluation preferences, 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) and HUBZone programs, only if awards are 
expected to be made at fair and reasonable prices.
    The new final 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, a transfer of 
some Federal contracts from large businesses to small businesses will 
probably occur. Large businesses may have fewer Federal contract 
opportunities if Federal agencies decide to set aside more Federal 
procurements for small businesses. Also, some Federal contracts may be 
awarded to HUBZone and SDB businesses instead of large businesses, 
since those two categories of small business are eligible for 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, however, may be offset by a greater number of

[[Page 74846]]

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, however, would 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 since the data on the 
size of business receiving a Federal contract are limited to 
identifying whether a business is small or other-than-small, without 
regard to the exact size of business.
    The revision to current size standards for testing laboratories is 
consistent with the SBA's statutory 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. As described in the regulatory 
impact analysis, this rule may impact small entities seeking SBA 7(a) 
Guaranteed Loans or Economic Injury Disaster Loans as well as the 
Federal Government's procurement preference programs.
    The size standard may also affect small businesses participating in 
the programs of other agencies that use the SBA size standards. As a 
practical matter, however, the SBA cannot estimate the impact of a size 
standard change on each and every Federal program that uses its size 
standards. No comments were received that identified a program or 
regulation that would be adversely affected by the proposed size 
standard. In cases where an SBA 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 (15 U.S.C. 632(a)(2)(c) and 13 CFR 121.902). If the 
agency is seeking to change size standards for the purposes of an RFA 
analysis, then the SBA's Office of Advocacy should be contacted 
pursuant to the RFA).
    Immediately below, the SBA sets forth a final regulatory 
flexibility analysis (FRFA) of this rule addressing the reasons and 
objective of the rule; a description and estimate of small entities to 
which the rule will apply; the projected reporting, record keeping, and 
other compliance requirements of the rule; the relevant Federal rules 
which may duplicate, overlap or conflict with the 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 this rule?

    The objective of this rule is to establish an appropriate size 
standard for the Testing Laboratories industry. The revision to the 
size standard for the Testing Laboratories industry more accurately 
defines the size of businesses in this industry that the SBA believes 
should be eligible for Federal small business assistance programs. 
Significant changes in the industry and in the requirements of 
Government clients support the need for a different size standard.

(2) What significant issues were raised by the public comments in 
response to the Initial Regulatory Flexibility Act (IRFA)?

    About a third of commentators believe that the SBA is permitting 
testing laboratories to be eligible that are already very successful 
and that do not need the additional advantage of being considered 
small. The SBA, however, believes that a higher size standard is 
necessary due to Federal contract requirements that require a high 
degree of competence and physical investment, a tendency for very large 
firms to acquire smaller testing laboratories, and the fact that small 
testing laboratories have been awarded Federal procurements 
significantly less than their overall share in the industry.

(3) What is the SBA's description and estimate of the number of small 
entities to which the rule will apply?

    Within the Testing Laboratories industry, 3,762 out of 4,126 
businesses are small under the $6 million size standard that is 
presently in place. The number of small businesses will increase by 120 
testing laboratories to 3,882 under a $10 million size standard. 
Testing laboratories becoming newly eligible for the SBA's assistance 
as a result of this rule cumulatively generate $635 million in 
receipts. The amount of receipts by small testing laboratories would 
increase from $2.7 billion to $3.3 billion out of a total of $6.4 
billion in receipts. The small business coverage in this industry would 
increase by 9.9% of total receipts. This is based on the U.S. Census 
Bureau's special tabulation of the 1997 Economic Census for the SBA's 
Office of Size Standards, which shows industry characteristics by firm 
size.

(4) Will this rule impose any additional reporting or recordkeeping 
requirements or other compliance 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's 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's 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 collection requirements from the SBA which 
require approval by the OMB under the Paperwork Reduction Act of 1980, 
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 rule are eligibility for the SBA's 
financial assistance programs such as 7(a) business loans, 504 business 
loans, and EIDL assistance and eligibility for the Federal Government's 
procurement preference programs for small business, 8(a) firms, SDBs, 
and HUBZone small businesses The SBA estimates that approximately $42 
million per year of additional Federal prime contracts may be awarded 
to businesses becoming newly designated small businesses in the Testing 
Laboratories industry and that approximately $2 million in new Federal 
loan guarantees could be made annually to these newly defined small 
businesses. The projected increase of three additional loans totaling 
approximately $2 million in new

[[Page 74847]]

Federal loan guarantees will have virtually no impact on the overall 
availability of loans for the SBA's loan programs, which have averaged 
about 50,000 loans totaling more than $12 billion per year in recent 
years.

(6) What alternatives were considered by the SBA to accomplish its 
regulatory objectives while minimizing the impact on small entities?

    In the proposed rule of April 9, 2002, the SBA considered 
alternative size standards which included a more limited increase to 
$7.5 million, and a larger increase to $12.5 million. The SBA decided 
not to propose the more moderate increase to $7.5 million because it 
believed that the very low share of Federal procurements to small 
testing laboratories indicated the need for a higher size standard to 
include those testing laboratories that can meet and perform on the 
majority of Federal analytical testing contracts. The SBA also 
considered, but rejected, the larger increase to $12.5 million based on 
the fact that two of the five factors considered in determining the 
appropriate size standard pointed to a size standard at, or only 
slightly above, the $6 million nonmanufacturing anchor size standard. 
The SBA believes that the evaluation factors should be virtually 
unanimous for an increase of this magnitude.

List of Subjects in 13 CFR Part 121

    Administrative practice and procedures, Government procurement, 
Government property, Grant programs--business, Loan programs--business, 
Small businesses.

    For reasons set forth in the preamble, the SBA amends part 121 of 
title 13 of the 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), 636(b), 637(a), 644(c) 
and 662(5) and Sec. 304, Pub. L. 103-403, 108 Stat. 4175, 4188, Pub. 
L. 106-24, 113 Stat. 39.


0
2. In Sec.  121.201, in the table ``Small Business Size Standards by 
NAICS Industry'', under the heading NAICS ``Subsector 541--
Professional, Scientific and Technical Services,'' revise entry 541380 
to read as follows:


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

* * * * *

             Small Business Size Standards by NAICS Industry
------------------------------------------------------------------------
                                          Size standards  Size standards
   NAICS codes      NAICS U.S. industry   in millions of   in number of
                           title              dollars        employees
------------------------------------------------------------------------
 
                              * * * * * * *
------------------------------------------------------------------------
     Subsector 541--Professional, Scientific and Technical Services
------------------------------------------------------------------------
 
                              * * * * * * *
------------------------------------------------------------------------
541380..........  Testing Laboratories..           $10.0
------------------------------------------------------------------------
 
                              * * * * * * *
------------------------------------------------------------------------


    Dated: September 27, 2003.
Hector V. Barreto,
Administrator.

    Editorial Note: This document was received in the Office of the 
Federal Register on December 19, 2003.
[FR Doc. 03-31794 Filed 12-24-03; 8:45 am]
BILLING CODE 8025-01-P