[Federal Register: October 21, 2009 (Volume 74, Number 202)]
[Proposed Rules]
[Page 53940-53941]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr21oc09-11]
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SMALL BUSINESS ADMINISTRATION
13 CFR Part 121
Small Business Size Standards: Size Standards Methodology
AGENCY: U.S. Small Business Administration.
ACTION: Notice of Availability of White Paper on Size Standards
Methodology.
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SUMMARY: The U.S. Small Business Administration (SBA) is advising the
public that it is making available a White Paper putting forth and
explaining how it establishes, reviews and modifies (when appropriate)
small business size standards. The document, entitled ``Size Standards
Methodology,'' is available on SBA's Web site where any interested
party can review and/or download it. Elsewhere in this issue of the
Federal Register SBA has published three proposed rules that would, if
adopted, modify a number of size standards in three North American
Industry Classification System (NAICS) Sectors, namely: Sector 44-45,
Retail Trade; Sector 72, Accommodation and Food Services; and Sector
81, Other Services. SBA has applied ``Size Standards Methodology'' to
those three proposed rules and will apply it to future regulatory
actions that relate to establishing, reviewing and modifying size
standards. The Agency welcomes comments on ``Size Standards
Methodology'' and on the three proposed rules elsewhere in this issue
of the Federal Register. ``Size Standards Methodology,'' is available
electronically from the SBA's Web site at: http://www.sba.gov/size.
ADDRESSES: The size standards methodology white paper is available
electronically on SBA's Web site at http://www.sba.gov/size. You may
submit comments on ``Size Standards Methodology,'' identified by Docket
number SBA-2009-0008 by one of the following methods: (1) Federal
eRulemaking Portal: http://www.regulations.gov. Follow the instructions
for submitting comments; or (2) Mail/Hand Delivery/Courier: U.S. Small
Business Administration, Khem R. Sharma, Chief, Size Standards
Division, 409 Third Street, SW., Mail Code 6530, Washington, DC 20416.
SBA will post all comments on www.regulations.gov. If you wish to
submit confidential business information (CBI) as defined in the User
Notice at www.regulations.gov, please submit the information to Khem R.
Sharma, Chief, Office of Size Standards, 409 Third Street, SW., Mail
Code 6530, Washington, DC 20416, or send an e-mail to
sizestandards@sba.gov. Highlight the information that you consider to
be CBI and explain why you believe SBA should hold this information as
confidential. SBA will review the information and make the final
determination of whether it will publish the information or not.
FOR FURTHER INFORMATION CONTACT: Carl J. Jordan, Program Analyst, Size
Standards Division, (202) 205-6618 or sizestandards@sba.gov.
SUPPLEMENTARY INFORMATION: To determine eligibility for Federal small
business assistance programs, SBA establishes small business
definitions (referred to as size standards) for private sector
industries in the United States. SBA's existing size standards use two
primary measures of business size--receipts and number of employees.
Financial assets, electric output, and refining capacity are used as
size measures for a few specialized industries. In addition, SBA's
Small Business Investment Company (SBIC) and the Certified Development
Company (CDC) Programs determine small business eligibility using
either the industry based size standards or net worth and net income
size standards. Currently, SBA's size standards consist of 45 different
size levels, covering 1,141 NAICS industries and 17 sub-industry
activities. Of these size levels, 32 are based on average annual
receipts, eight are based on number of employees, and five are based on
other measures. In addition, SBA has established 11 other size
standards for its financial and procurement programs.
Over the years, SBA has received comments that its size standards
have not kept up with changes in the economy and, in particular, that
they do not reflect the changes in the Federal contracting marketplace.
Therefore, SBA has undertaken a complete review of all small business
size standards. The last overall review of size standards occurred
during the late 1970s to early 1980s. Since then, most reviews of size
standards have been limited to in-depth analyses of specific industries
in response to requests from the public and Federal agencies. SBA also
makes periodic inflation adjustments to its monetary based size
standards. The latest inflation adjustment to size standards was
published in the Federal Register on July 18, 2008 (73 FR 41237).
SBA has, in the past, included its methodology for reviewing size
standards in its proposed and final rules that related to the industry
or industries under examination. In the course of its comprehensive
review of all small business size standards SBA has now developed and
formalized its small business size standards processes. ``Size
Standards Methodology'' describes how SBA establishes, evaluates and
adjusts its small business size standards pursuant to the Small
Business Act (Act) and related legislative guidelines. Under the Act
(Pub. L. 85-236, as amended), the SBA Administrator (Administrator) has
authority to establish small business size standards for Federal
government programs. Congress left to administrative discretion
precisely how the Administrator should establish small business size
standards or what they should be. ``Size Standards Methodology''
provides a brief review of the legal authority, early legislative
history and regulatory history of small business size standards, a
detailed description of the size standards methodology, and concludes
with a discussion of numerous policy issues regarding the objectives
and direction of size standards. An appendix at the end of the document
summarizes the detailed analytical steps involved in the evaluation of
size standard for an industry.
In establishing size standards, the Act and its legislative history
highlight two considerations. First, size standards should vary to
account for differences among industries. Second, the policies of the
Agency should assist small businesses as a means of encouraging and
strengthening their competitiveness in the economy. These two
considerations form the basis for the SBA current methodology for
establishing small business size standards.
SBA examines the structural characteristics of an industry as a way
to assess industry differences and the overall degree of
competitiveness of an industry and of firms within the industry. ``Size
Standards Methodology'' describes more fully how SBA examines industry
structure and analyzes five primary factors--average firm size, degree
of competition within an industry, start up costs and entry barriers,
distribution of firms by size, and small business share in Federal
contracts. SBA also considers other secondary factors as they relate to
the industries and the interests of small businesses, including
technological
[[Page 53941]]
change, competition among industries, industry growth trends, and
impacts on SBA programs.
SBA conducts a statistical analysis of data on the primary factors,
and secondary factors as appropriate, to establish a size standard for
a specific industry. As a starting point, SBA presumes $7.0 million as
an appropriate size standard for the services, retail trade,
construction, and other industries with receipts based size standards;
500 employees for the manufacturing, mining and other industries with
employee based size standards; and 100 employees for the wholesale
trade industries. These three levels, referred to as ``anchor size
standards,'' are not minimum size standards, but rather benchmarks or
starting points. To the extent an industry displays ``differing
industry characteristics,'' a size standard higher, or in some cases
lower, than an anchor size standard is supportable. ``Size Standards
Methodology'' includes an extensive discussion of the statistical
analyses involved in size standards determination.
SBA welcomes comments from the public on a number of issues. SBA is
aware that different choices among size standards can involve complex
tradeoffs among relevant variables; SBA invites comments on how to
identify and weigh those variables. Suggestions are invited on
alternative methodologies for determining small businesses; on how
these size standards affect competition in general and within the
specific industry; on alternative or additional factors that SBA should
consider; on whether SBA's approach to small business size standards
makes sense in the current economic environment; on whether SBA's using
anchor size standards is appropriate in the current economy; on whether
there are gaps in SBA's methodology because of the lack of
comprehensive data; and on alternative datasets SBA should consider for
a specific sector.
The concluding section of ``Size Standards Methodology'' raises a
number of policy questions that SBA has to address in developing a
robust methodology for establishing, evaluating and revising its small
business size standards. Examples include how high of a size standard
is too high? Should there be a single basis for all size standards
(i.e., employees or annual receipts)? Should there be a fixed number of
``bands'' of size standards or separate standard for each industry?
``Size Standards Methodology'' includes several other issues, including
some that tend to be on-going questions.
SBA encourages the public to review ``Size Standards Methodology''
and to comment on it either in whole or in part.
Dated: October 9, 2009.
Karen G. Mills,
Administrator.
[FR Doc. E9-25196 Filed 10-20-09; 8:45 am]
BILLING CODE 8025-01-P