documents in the last year, 84 Commenters' support for SBA's proposal focused on four main arguments: (1) Increasing the size standard would allow existing small firms to retain their small business status for an extended period; (2) The proposed increase would allow firms to gain more experience before graduating from the size standard; (3) Increasing the size standard would increase the number of small firms and the number of small business set-aside opportunities; and (4) The proposed increase accurately reflects the changes to industry structure that have occurred since the last review of the size standard. 1503 & 1507. It is not an official legal edition of the Federal These comments and SBA's responses are discussed below. developer tools pages. Based on the FPDS-NG data for fiscal years 2018-2020, SBA estimates that about 75 active firms in Federal contracting in those industries would lose small business status under Alternative Option One, most of them from Sector 56. However, based on the historical trends of the EIDL program data, SBA estimates that, on an annual basis, the newly defined small businesses under the increases of 46 size standards could receive three EIDL loans, totaling about $0.11 million. (5) What alternatives will allow SBA to accomplish its regulatory objectives while minimizing the impact on small businesses? Newly-qualified small businesses will also benefit from the SBA's EIDL program. As a result of this expanded runway, small firms can acquire more experience and technical capabilities to be able to compete with larger firms upon graduation from the size standard. Ch. The Size Standards Methodology white paper explains how SBA establishes, reviews, and modifies its receipts-based and employee-based small business size standards. As explained in the Size Standards Methodology white paper, in addition to adopting all results of the primary analysis, SBA evaluates other relevant factors as needed such as the impact of the reductions in or increases to size standards on the distribution of contracts awarded to small businesses, and may adopt different results with the intention of mitigating potential negative impacts. A total of $154 billion in average annual contract dollars were awarded to businesses in those industries during the period of evaluation, and 33.9% of the dollars awarded went to small businesses. sam.gov Comments in favor of SBA's proposed rule expressed that SBA's proposed size standards better reflected the current industry composition for the industries covered by this rulemaking. This represents a 0.2% increase of the loan amounts relative to the group baseline. What is the need for this regulatory action? SBA uses financial assets for certain financial industries and refining capacity, in addition to employees, for the petroleum refining industry to measure business size. Start Printed Page 18684 These markup elements allow the user to see how the document follows the . The Economic Census provides information across all industries under its scope, using uniform definitions and measures, which allow for consistent industry comparisons at the same moment in time. As a result, large businesses may lose some Federal contracting opportunities. In the proposed rule, SBA sought comments on its proposal to increase size standards for 46 industries, and retain the current size standards for the remaining 48 industries or subindustries in Sectors 54, 55, and 56. One engineering trade association representing more than 5,500 engineering firms and 600,000+ engineers, surveyors, architects, and other specialists nationwide recommended that SBA create additional size standards (in addition to the existing four) under NAICS 541330 to account for the wide spectrum of engineering disciplines (such as civil, electrical, mechanical, environmental, structural, etc.) documents in the last year, 128 on However, SBA is not adopting Alternative Option Two either because the results discussed in the Regulatory Impact Analysis section, below, shows that retaining all size standards at their current levels would cause otherwise qualified small businesses to forgo various small business benefits becoming available to them under the option of increasing 46 and retaining 48 size standards adopted in this final rule. The commenters maintained that the proposed increases to size standards for these NAICS codes are not adequate. . Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, reducing costs, harmonizing rules, and promoting flexibility. This also provides SBA with an opportunity to seek and incorporate public input to the size standards review and analysis. Thus, SBA is increasing the size standards for 46 industries in Sectors 54, 55, and 56, including 27 industries in NAICS Sector 54 (Professional, Scientific and Technical Services), 2 industries in Sector 55 (Management of Companies and Enterprises), and 17 industries in Sector 56 (Administrative and Support and Waste Management and Remediation Services). Thus, SBA does not believe it is reasonable to exclude these costs from the calculation of receipts. NAICS 541511 and 541512, on the other hand, comprise of establishments primarily focused on planning and designing software and computer systems, and NAICS 541830 comprises establishments primarily engaged in purchasing advertising time or space from media outlets and reselling it to advertising agencies or individual companies directly. (83 FR 18468) to solicit comments from the public and notify stakeholders of the proposed changes to the Methodology. Businesses losing small business status would also be impacted by way of access to loans through the SBA's EIDL loan program. Moreover, the data shows that there is not a disproportionate share of Federal contracting opportunities available to firms that have exceeded the size standard as compared to their share of total industry receipts. Three commenters suggested that SBA create multiple size classifications within the industry to identify and target resources towards firms that are truly small and ensure that very large businesses are not able to access resources intended for small businesses. 2. SBA's Size Standards Methodology white paper is available on its website at Alternative Option One to the final rule, a more stringent alternative, would be to adopt size standards based solely on the analytical results. Under this option, given the current COVID-19 pandemic, as discussed elsewhere, SBA considered retaining the current levels of all size standards even though the analytical results suggested changing them. These tools are designed to help you understand the official document At least eight commenters recommended a higher $39.5 million size standard for NAICS 541330 based on the belief that both the current and proposed size standard levels would disadvantage graduating small firms (larger small firms) that would be competing with much larger firms under full and open competition. Commenters opposed to SBA's proposed increase to the size standard for NAICS 541930 included six language interpretation firms and one individual, of which six proposed to leave the size standard unchanged at $8 million and one suggested lowering it to $4 million. Under Alternative Option Two, given the current COVID-19 pandemic, SBA considered retaining all size standards at their current levels even though the analysis of relevant data suggested changing them. Based on the evaluation of public comments it received on the proposed rule and on the results of analyses of its industry and Federal contracting factors using the latest available data and considerations of the impact of the COVID-19 pandemic on small businesses and Government response, SBA is adopting the size standards as proposed in the November 2020 proposed rule. OMB's Office of Information and Regulatory Affairs has determined that this rule is not a major rule as defined by 5 U.S.C. For purposes of Executive Order 13132, SBA has determined that this final rule will not have substantial, For the reasons set forth in the preamble, SBA amends 13 CFR part 121 as follows: 1. The commenter also pointed to the difference in the amounts of dollars obligated between NAICS 541310 and NAICS 541330 as evidence of the incorrect classification of A&E contracts, arguing that the more widespread use of NAICS 541330 with a larger size standard was responsible for that difference. The Small Business Act requires that the size of businesses in services industries be based on average annual gross receipts. Start Printed Page 18672, Table 3Distribution of Contracting Dollars and Industry Receipts by Firm Size in NAICS 541330. Ten commenters raised questions or offered other recommendations regarding SBA's analysis of size standard for NAICS 541330 (Engineering Services). Effective January 1, 2022, SBA stopped accepting applications for new COVID EIDL loans or advances. Generally, SBA believes that it is not always appropriate to evaluate industries under a common size standard even when the business activities of the industries are similar or co-dependent. As part of the second five-year review of size standards, SBA reviewed all receipt-based size standards in NAICS Sector 54 (Professional, Scientific and Technical Services), Sector 55 (Management of Companies and Enterprises), and Sector 56 (Administrative and Support and Waste Management and Remediation Services) to determine whether the existing size standards should be retained or revised based on the current industry and Federal market data. SBA received six comments to the proposed rule that did not discuss SBA's proposed changes to size standards for any particular industry or sector, but instead, focused on broader issues applicable to all sectors. SBA also agrees with commenters that industry consolidation and the growth of large firms has the potential to increase the calculated factors for weighted average receipts and the Gini coefficient. However, the size standards of 42 industries for which the analytical results suggest lowering size standards would be lowered. A higher size standard will also provide the Government with access to better services through robust competition, while fostering growth of small businesses in this industry. Only official editions of the Federal Federal projects are about more than just buildings and systems. The commenter explained that allowing small businesses to grow to the size that can support agency needs as prime contractors will allow agencies to set aside more contracts for small businesses. The most significant benefit to businesses from increases to size standards is gaining eligibility for Federal small business assistance programs or retaining eligibility for a longer period. In its recent Memorandum No. Specifically, NAICS 541611 belongs to NAICS Industry Group 5416 (Management, Scientific, and Technical Consulting Services) and NAICS 541990 falls under NAICS Industry Group 5419 (Other Professional, Scientific, and Technical Services). 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. The coalition maintained that the advertising industry is inequitably concentrated, with the top 4 advertising agencies or their networks accounting for more than 50% of Federal Government revenue in 2019, which supports a higher size standard for NAICS 541810. As such, SBA's analysis shows that some of the same pressures do exist for the portion of work covered under the exception as in the general industry. A summary of SBA's size standards revisions in this rule can be found below in Table 6, Summary of Size Standards Revisions in NAICS Sectors 54, 55, and 56. regulatory information on FederalRegister.gov with the objective of SBA discusses these comments and its responses below. documents in the last year, 686 Due to data limitations, for FY 2019-20, some loans with both physical and EIDL loan components could not be broken into the physical and EIDL loan amounts. Counts are subject to sampling, reprocessing and revision (up or down) throughout the day. of EIDL loans to small businesses (FY 2018-2020), Total amount of EIDL loans to small businesses (FY 2018-2020), Estimated no. Commenters to this issue did not provide any data in support of their position. Comments also included a submission from SBA detailing a December 17, 2020, meeting that occurred between SBA and a trade association regarding SBA's size standard methodology and its calculations used in deriving the proposed size standard for engineering services. However, in accordance with its policy of not lowering any size standard in the current environment due to the COVID- The commenters maintained that over 70% of the total spend in NAICS 541330 goes through limited competition vehicles, such as IDIQ, GWAC, and BIC vehicles. should verify the contents of the documents against a final, official Rather than revise all size standards at one time, SBA is revising size standards by grouping industries within various NAICS sectors that use the same size measure ( 8, Standard Industrial Classification of Establishments; and Elimination of Statistical Policy Directive No. By comparing these results to the small business share of industry receipts for these industries, (35.8% for NAICS 541611 and 52.3% for NAICS 541990), SBA determined that small businesses are underrepresented in this particular segment (OCONUS contracts) of the Federal contracting market within these industries. Specifically, SBA requested comments on whether the proposed revisions are appropriate for the industries covered by the proposed rule; whether the decision not to lower any size standards is justified by the consideration of the impact of the COVID-19 pandemic on small businesses and overall economy; whether the equal weighting of individual factors to derive an industry size standard is appropriate; and whether the data sources used were appropriate or sufficient. legal research should verify their results against an official edition of Each document posted on the site includes a link to the documents in the last year, 909 These commenters recommended that SBA establish a common size standard between Engineering Services and other related industries, offered recommendations and submitted questions regarding SBA's analysis of the engineering size standard. Thus, based on its methodology for evaluating size standards and the latest data, SBA determines that the current size standard of $16.5 million is appropriate with respect to the Federal contracting factor. of additional 7(a) and 504 loans to newly-qualified small firms, Estimated additional 7(a) and 504 loan amount to newly-qualified small firms ($ million), % increase to 7(a) and 504 loan amount relative to the total amount of 7(a) and 504 loans to small businesses, Total no. What are the potential benefits and costs of this regulatory action? As discussed earlier in this rule, in accordance with the Jobs Act, SBA is mandated to review all size standards every five years and make necessary adjustments to reflect current industry and market conditions. Of the 45 comments concerning the size standard for NAICS 541330, 24 fully supported the SBA's proposal to increase that size standard from $16.5 million to $22.5 million. Conversely, an industry with average assets that are lower than most other industries is likely to have lower startup costs; this will support either lowering or maintaining the size standard. These include the 8(a)/BD (Business Development) Program, the Small Disadvantaged Businesses (SDB) Program, the Historically Underutilized Business Zones (HUBZone) Program, the Women-Owned Small Businesses (WOSB) Program, the Economically Disadvantaged Women-Owned Small Businesses (EDWOSB) Program, and the Service-Disabled Veteran-Owned Small Businesses (SDVOSB) Program. This may also diminish the risks of providing SBA's loans to firms that do not need them the most. What are the relevant Federal rules that may duplicate, overlap, or conflict with the rule? Federal Register The President of the United States manages the operations of the Executive branch of Government through Executive orders. Thus, SBA believes that an increase in firms of the magnitude described above will not significantly disadvantage currently small firms. SBA does not agree with commenters that the general level of size standards is too high and that the maximum thresholds should be set at $1 million or 50 employees. Effective October 1, 2017, SBA adopted the OMB's 2017 NAICS revisions to its size standards (82 FR 44886, September 27, 2017).[1]. SBA also evaluated the small business level and share of Federal contracts in each of the industries using data from the Federal Procurement Data SystemNext Generation (FPDS-NG) for fiscal years 2016-2018. 541620 - Environmental Consulting Services. employees or receipts). 601(3)). Another commenter with 40 employees expressed that although they may be considered a larger small engineering firm, they support maintaining the size threshold at the current level to ensure that smaller small firms continue to benefit from SBA's contracting programs. In response to the comment questioning the SBA's rationale for increasing the size standard for the general NAICS 541330 industry but decreasing the size standard for one of the exceptions to that NAICS code, namely the Military and Aerospace Equipment and Military Weapons exception, SBA would like to clarify that while the calculated size standard for this exception was $39 million, a decrease from the current size standard, SBA proposed to retain the current $41.5 million size standard. 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 revisions to the existing size standards for 46 industries in NAICS Sectors 54, 55, and 56 are consistent with SBA's statutory mandate to help small businesses grow and create jobs and to review and adjust size standards every five years. For the above reasons, SBA is adopting the $20 million size standard for NAICS 541930, as proposed. include documents scheduled for later issues, at the request Table 9Impacts of Increasing Size Standards. The primary benefit of adopting Alternative Option One would include: (1) SBA's procurement, management, technical and financial assistance resources would be targeted to the most appropriate beneficiaries of such programs according to the analytical results; (2) Adopting size standards based on the analytical results would also promote consistency and predictability in SBA's implementation of its authority to set or adjust size standards; and (3) Firms who would remain small would face less competition from larger small firms for the remaining set aside opportunities. Among the remaining 80 unique and pertinent comments, 45 referenced to the size standard for NAICS 541330, six to NAICS 541310, 24 to NAICS 541930, six to other industries, including NAICS 541810, 541611, 541990, and 541350, and six did not specify any 6-digit NAICS code. For example, SBA used the RMA data ( The commenter requested that SBA provide a more detailed explanation of how the proposed size standards for these industries were determined. Until the ACFR grants it official status, the XML What size standards has SBA identified by North American Industry Classification System codes? The commenters argued that the Brooks Act has caused this industry to be dominated by 10 large firms, making it nearly impossible for small businesses to compete for Federal opportunities upon graduation from the size standard. For a summary of comments and SBA's responses, refer to the SBA's April 11, 2019, This final rule is part of the second five-year review of size standards in accordance with the Jobs Act. SBA found that this suggestion is not new, nor is it unique to NAICS 541810. Start Printed Page 18677 notice (86 FR 35350), for the 2022 revisions to the North American Industry Classification System (NAICS), . The comment, submitted on behalf of a coalition of advertising agencies, expressed support for the proposed increase to the size standard for this industry, but urged SBA to consider adopting a higher size standard between $28.5 million and $30 million based on increased demand for digital marketing services, which requires small firms to invest more heavily in information technology (IT) infrastructure and resources. (3) What are the projected reporting, record keeping, and other compliance requirements of the rule? Table 4 of the November 2020 proposed rule (85 FR 72584), Size Standards Supported by Each Factor for Each Industry (Receipts), shows the results of analyses of industry and Federal contracting factors for each industry and subindustry (exception) covered by the proposed rule. SBA agrees with the commenters' position that increasing the size standard to $39.5 million would allow significant number of businesses above the current or SBA's proposed size standard to qualify as small and become eligible for Federal opportunities intended for small businesses. (RIN 3245-AG91) and are summarized and discussed below. Another argued that a company with a $20 million revenue does not need Government assistance. SBA also agrees that its policy to not lower size standards at this time based on the analytical results is appropriate and reduces the level of uncertainty for small businesses as the wider economy continues to improve. Regarding NAICS 541810, specifically, using the FPDS-NG data for fiscal years 2016-2018 (the latest available when the proposed rule was drafted), SBA calculated a Federal contracting factor of 20.8% which supported a size standard of $20 million. 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. SBA believes that increasing the size standard to the proposed $22.5 million level based on the analysis of all factors may increase the number of set-asides in this industry and further benefit the small firms that are already well-represented in the Federal contracting market at the current size standard. Specifically, in this final rule, SBA is adopting the proposed $11 million size standard for NAICS 541310 (Architectural Services) and the proposed $22.5 million size standard for NAICS 541330 (Engineering Services. documents in the last year, by the Energy Department For existing contracts, small business contractors are required to update their SAM registration as necessary, to ensure that they reflect the Contractor's current status (FAR 52.219-28). Specifically, SBA is increasing the size standards for 46 industries in those sectors, including 27 industries in NAICS Sector 54 (Professional, Scientific and Technical Services), two industries in Sector 55 (Management of Companies and Enterprises), and 17 industries in Sector 56 (Administrative and Support and Waste Management and Remediation Services). 7922; Mendenhall Glacier Recreation Area; Alaska, Safety Zone; Sausalito Fireworks Display; San Francisco Bay, Sausalito, CA, Energy Conservation Program: Test Procedure for Commercial Warm Air Furnaces, Agency Information Collection Activities; Migratory Bird Surveys, Migraine: Developing Drugs for Preventive Treatment, Moving Beyond COVID-19 Vaccination Requirements for Federal Workers, Imposing Sanctions on Certain Persons Destabilizing Sudan and Undermining the Goal of a Democratic Transition, Comments on Proposed Changes to NAICS 541310Architectural Services and NAICS 541350Building Inspection Services, Comments on Proposed Changes to NAICS 541330Engineering Services, Comments Supporting the Proposed $22.5 Million Size Standard, Comments Opposing the Proposed $22.5 Million Size Standard, Comments Recommending a Higher $39.5 Million Size Standard, Summary of the Discussion of Comments to NAICS 541330, Comments on Proposed Changes to NAICS 541611Administrative Management and General Management Consulting Services & NAICS 541990All Other Professional, Scientific and Technical Services, Comments on Proposed Changes to NAICS 541810Advertising Agencies, Comments on Proposed Changes to NAICS 541930Translation and Interpretation Services, Comments Supporting the Proposed $20 Million Size Standard, Comments Opposing the Proposed $20 Million Size Standard, Comments on Proposed Changes to All Sectors, Summary of Adopted Revisions to Size Standards, Evaluation of Dominance in Field of Operation, Compliance With Executive Orders 12866, the Congressional Review Act (. Another commenter opposed SBA's proposed size standards based on the level of fraudulent activity that occurred during the execution of the Paycheck Protection Program (PPP). That said, when agencies consider these limited-competition vehicles, they must continue to prioritize small-business contracting ahead of consolidating their contracts. This PDF is 3. 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. One commenter also supported proposed changes based on SBA's policy decision to not lower size standards at this time considering the impact from the COVID-19 induced economic recession. documents in the last year, by the Land Management Bureau M-22-03 on Advancing Equity in Federal Procurement, the Office of Management and Budget (OMB) emphasized that agencies must not use BIC contracts where doing so might threaten the agency's small business goals or the growth of the small-business supplier base. 4. The size standard changes in this final rule impose no additional reporting or record keeping requirements on small businesses. SBA also disagrees with the comment that SBA's resources should be wholly devoted to preventing abuse of PPP loans at the expense of completing the comprehensive review of size standards. While every effort has been made to ensure that 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. Table 3, Distribution of Contracting Dollars and Industry Receipts by Firm Size in NAICS 541330, summarizes these results. In this final rule, SBA is adopting the proposed size standards from the November 2020 proposed rule without change. SBA disagrees with commenters that the size standard for Engineering Services should be aligned with other industries, such as Architectural Services, that may perform similar activities. Open for Comment, Economic Sanctions & Foreign Assets Control, Public Land Order No. To account for different services and specializations that engineering firms provide, SBA has already established three subindustries (or exceptions) under NAICS 541330, in addition to the size standard for the general engineering industry. of EIDL loans to small businesses in industries for which SBA considered decreasing size standards (FY 2018-2020), Total amount of EIDL loans to small businesses in industries for which SBA considered decreasing size standards ($ million) (FY 2018-2020), Estimated no. One commenter noted that Federal contract values for language services continue to grow, and that the proposed increase to the size standard will increase set-aside opportunities for small businesses and ensure that the Federal Government has an adequate pool of small businesses to meet its growing needs for language and interpretation services. The definition of receipts provides for several exclusions, including amounts collected for another by an advertising agent. Of the 14 comments expressing mixed support for the SBA's proposed $22.5 million size standard for this industry, 12 comments (which were almost identical) petitioned SBA to further increase the size standard for NAICS 541330 to at least $39.5 million. SBA received a total of 93 comments to the proposed rule from a wide range of entities including individuals, corporations, trade associations and an academic institution. For example, with a value of 20.8% the Federal contracting factor is significant for NAICS 541810 supporting a size standard of $20 million, but it is not significant for NAICS 541830. documents in the last year, 1067 Moreover, SBA does not agree with commenters' statements that the Brooks Act disadvantages small firms. More information and documentation can be found in our One engineering firm with average annual revenues below $6 million expressed that competing against firms with $20 million in average annual receipts and an employee count of 100 or more people would be difficult for smaller small firms because larger firms have experience and resources that smaller small firms do not have. Thus, based on SBA's methodology for evaluating size standards, SBA finds that there are adequate Federal contracting opportunities for small firms at the current or proposed size standard that have graduated from their small business size status because the share of Federal contracting dollars being awarded to small firms in that size range is generally proportionate to their respective share of industry receipts. What is SBA's description and estimate of the number of small businesses to which the rule will apply? The movement of contracts from unrestricted competition to small business set-aside contracts might result in competition among fewer total bidders, although there will be more small businesses eligible to submit offers under the higher size standards. Of the six comments received, four comments were opposed to SBA's proposed changes and two comments were in favor. (1) The Brooks Act qualifies as a unique characteristic in the 541330 industry and should be considered for adjusting the size standard to a higher value of at least $39.5 million. on Changes in industry structure, technological changes, productivity growth, mergers and acquisitions, and updated industry definitions have changed the structure of many the industries covered by this final rule. electronic version on GPOs govinfo.gov. SBA's definition of receipts states the following: Receipts means `total income' (or in the case of a sole proprietorship, `gross income') plus `cost of goods sold' as these terms are defined and reported on Internal Revenue Service (IRS) tax return forms . NAICS Code 541330 - Engineering Services is a final level code of the " Professional, Scientific, and Technical Services " Sector. A large amount of the losses are accounted for by Sector 54 (see Table 11). With an expanded pool of small businesses, the Federal Government will have access to more qualified small businesses to choose from, and as a result, will likely set aside more contracts for small businesses. SBA also reviewed the System for Award Management (SAM) data for fiscal year 2020 and found that only about 26% of firms registered under NAICS 541611 as the primary industry were registered under NAICS 541990 as one of their secondary NAICS codes. About the Federal Register SBA agrees with the commenters that the higher $20 million size standard reflects current market conditions in the language and interpretation services industry, will allow small businesses to grow remain small for an extended period, expand Federal opportunities for small businesses, and provide the Government with an expanded pool of qualified small businesses to meet their growing translation and interpretation services needs. The association asked SBA to provide details on the weighting of primary factors under the SBA's size standard methodology, the impact of the COVID-19 pandemic on the review of size standards, and the status of the 2017 Economic Census special tabulation. Start Printed Page 18689 Industry Sector Professional, Scientific, and Technical Services Total Companies 61,787 The added competition from more businesses qualifying as small can result in lower prices to the Federal Government for procurements set-aside or reserved for small businesses, but SBA cannot quantify this impact. As a result, large businesses may lose some Federal contracting opportunities. Of the 45 comments received regarding the SBA's proposal to increase the size standard for NAICS 541330 from $16.5 million to $22.5 million, SBA received six comments that were totally opposed to the proposed size standard increase. and other engineering activities related to the design, development, and utilization of machines, materials, instruments, processes, and systems. http://www.rmahq.org/estatement-studies/ sizestandards@sba.gov. For example, as shown in Table 4 of the November 2020 proposed rule, the weighted average firm size for NAICS 541611 is $2.5 billion which supports a size standard of $41.5 million, whereas the weighted average firm size for NAICS 541990 is only $194 million which supports a size standard of $14 million. Table 11Net Impacts of Size Standards Changes Under Alternative Option One. However, although the data provided to SBA are sufficient to demonstrate the concentration of Federal contracting dollars among a handful of large firms, the data does not demonstrate that SBA's current or proposed size standard for NAICS 541330 would have an adverse impact on the ability of small firms to compete for Federal contracting opportunities in that industry. SBA's analysis showed that 18.6% of the total dollars obligated to NAICS 541330 went to firms below the proposed $22.5 million size standard and 25.2% of the total dollars obligated to that industry went to firms below the commenters' suggested size standard of $39.5 million. 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. However, regarding the Federal contracting factor, SBA found that, under the current $16.5 million size standard, the small business share of Federal contracting dollars in this industry was greater than the small business share of total industry receipts. SBA recently received a preliminary special tabulation based on the 2017 Economic Census. Based on the 2017 preliminary tabulation, 3.5% of firms earned receipts more than $25 million, accounting for 70.8% of total industry receipts. Moreover, SBA also believes that the proposed increase will also benefit all small businesses in the industry as the Federal Government is likely to set aside more contracting opportunities for small businesses because of the availability of an expanded pool of experienced small firms. provide legal notice to the public or judicial notice to the courts. The documents posted on this site are XML renditions of published Federal The same trade association also submitted its own comment detailing its concerns with the data and approach SBA used to analyze the size standard for NAICS 541330. An interim final rule on SBA's latest inflation adjustment to size standards, effective August 19, 2019, was published in the SBA agrees with commenters that the SBA's proposed increase to the size standard for NAICS 541330 better reflects the current economic characteristics of the firms within this industry. For example, engineering firms are significantly larger than architectural firms based on simple and weighted average firm size (engineering firms are roughly three times larger based on the simple average firm size and 25 times larger based on the weighted average firm size). Federal Register. Due to this expanded runway provided by the higher proposed size standard, firms will be able to acquire more experience and technical capabilities to compete with larger firms upon their graduation from their small business status. SBA discusses the concerns raised by these commenters and its responses, below. Because the benefits provided through this program are contingent on 632, 634(b)(6), 636(a)(36), 662, and 694a(9); Pub. they receive under the current size standards as a baseline, one can examine the potential benefits, costs, and transfer impacts of changes to size standards on small businesses and on the overall economy. With a greater number of businesses defined as small due to the increases to size standards, Federal agencies may choose to set-aside more contracts for competition among small businesses only instead of using a full and open competition. The commenter inquired whether SBA's analysis showed similar pressures on the parameters that impact size standards for the general engineering industry and the exception, and it suggested that the pressures are generally the same between the industries. Among those newly-defined small businesses seeking SBA's loans, there could be some additional costs associated with verification of their small business status. [2] SBA uses two primary measures of business size for size standards purposes: Average annual receipts and average number of employees. Based on the 2012 Economic Census, about 1,050 (0.3%) firms would lose their small business status under this option. As such, SBA does not believe that it would be appropriate to increase the size standard for this industry based solely on the requirements of the Brooks Act because the latest data does not show that small firms are significantly disadvantaged as a result of the requirements of this law. www.regulations.gov Federal Register Providing geophysical surveying and mapping services--are classified in Industry 541360, Geophysical Surveying and Mapping Services; . In response to the comment that SBA should create additional size standard exceptions under NAICS 541330 to better reflect the differing characteristics and specializations of engineering firms, SBA surveyed the alternative data sources available from the U.S. Census Bureau and determined that the available data was not sufficient to conduct a size standard analysis for the different segments of the engineering industry as suggested by the commenter. 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. 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. In such cases, SBA applied the ratio of EIDL amount to total (physical loan + EIDL) amount using FY 2016-18 data to the FY 2019-20 data to obtain the amount attributable to the EIDL loans. Accordingly, in the next section SBA provides a Regulatory Impact Analysis of this final rule, including (1) A statement of the need for the regulatory action, (2) An examination of alternative approaches, and (3) An evaluation of the benefits and costsboth quantitative and qualitativeof this regulatory action and the alternatives considered. In 1995, SBA published in the Learn more here. 13 CFR 121.104(a). of 7(a) and 504 loans to small businesses in industries for which SBA considered decreasing size standards (FY 2018-2020), Total amount of 7(a) and 504 loans to small businesses in industries for which SBA considered decreasing size standards ($ million) (FY 2018-2020), Estimated no. Transfer Impacts of Increasing Size Standards. For example, based on the FPDS-NG data for fiscal years 2018-2020, SBA determined that 9.5% of the average annual total dollars obligated to NAICS 541330 went to firms above the current $16.5 million size standard but below the $39.5 million size standard suggested by commenters. With the availability of a larger pool of small businesses under the proposed increases to the size standard, some unrestricted Federal contracts that would otherwise be awarded to large businesses may be set aside for small businesses. The action does not have retroactive or preemptive effect. L. 116-136, Section 1114. In view of the effects of the COVID-19 pandemic on small businesses and Federal Government efforts to provide relief to small businesses and the overall economy, SBA proposed to maintain the current size standards for all industries where the analytical results suggested decreases and to increase the size standards for all industries where analytical results suggested increases. . 13 CFR 121.104. Another commenter expressed concerns about the potential consequences of not adopting the SBA's proposal and pointed to the current distribution of Federal contracts in this industry, which is dominated by a few large firms as a symptom that could be exacerbated by a failure to adopt the proposed increase to the size standard. Explains how SBA establishes, reviews, and other Engineering activities related to the standard. On average annual gross receipts Executive branch of Government through Executive orders not a major rule defined... 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