# Small Business Size Standards: Adjustment of Monetary-Based Size Standards, Disadvantage Thresholds, and 8(a) Eligibility Thresholds for Inflation

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/fr%3A2022-24595

## Record

- **Collection:** Federal Register
- **Document type:** Rule
- **Published:** November 17, 2022
- **Citation:** 87 FR 69118

## Text

SMALL BUSINESS ADMINISTRATION
13 CFR Parts 121, 124, and 127
RIN 3245-AH93
Small Business Size Standards: Adjustment of Monetary-Based Size Standards, Disadvantage Thresholds, and 8(a) Eligibility Thresholds for Inflation

AGENCY:

U.S. Small Business Administration.

ACTION:

Final rule and interim final rule with request for comments.

SUMMARY:

This rulemaking finalizes, without change, the U.S. Small Business Administration's (SBA or Agency) 2019 interim final rule (RIN 3245-AH17) that adjusted monetary-based industry size standards (
i.e.,
receipts- and assets-based) for inflation that occurred since 2014. This rulemaking also includes three interim final actions. First, SBA adds an additional 13.65 percent inflation increase to the monetary small business size standards, which have been recently adjusted as part of the second five-year review of size standards pursuant to the Small Business Jobs Act of 2010 (Jobs Act). This concurrent additional adjustment accounts for the inflation that has occurred since 2019 that has not been adequately addressed by the Agency's previous adjustments to its small business size standards under the Jobs Act. Second, this rulemaking adjusts three program-specific monetary size standards to account for inflation: the size standards for sales or leases of government property, the size standards for stockpile purchases, and alternative size standard based on tangible net worth and net income for the Small Business Investment Company (SBIC) program. Third, SBA adjusts for inflation the economic disadvantage thresholds applicable to the 8(a) Business Development and Economically Disadvantaged Women-Owned Small Business (EDWOSB) programs, and the dollar limit for combined total 8(a) contracts.

DATES:

Effective date:
This rule is effective on December 19, 2022.

Comment date:
Comments on the interim final provisions of this rule must be received on or before January 17, 2023.

FOR FURTHER INFORMATION CONTACT:

Khem Sharma, Ph.D., Chief, Office of Size Standards, (202) 205-6618 or
sizestandards@sba.gov.
This phone number can also be reached by individuals who are deaf or hard of hearing, or who have speech disabilities, through the Federal Communications Commission's TTY-Based Telecommunications Relay Service teletype service at 711.

SUPPLEMENTARY INFORMATION:

I. Background

As explained in the SBA's “Size Standards Methodology” white paper available at
https://www.sba.gov/size,
SBA reviews small business size standards and makes necessary adjustments to them for three reasons: (i) changes in industry structure and Federal market conditions, (ii) inflation, and (iii) revision to the North American Industry Classification System (NAICS). In 2019, SBA published an interim final rule (IFR) adjusting for inflation all monetary-based industry size standards (84 FR 34261; July 18, 2019) (“July 2019 IFR”). Certain provisions of this rulemaking finalize, without change, the SBA's July 2019 IFR that adjusted monetary-based industry and certain program-specific size standards (
i.e.,
receipts- and assets-based) for inflation that occurred since the previous inflation adjustment in 2014 (79 FR 33647; June 12, 2014).

After the inflation adjustment in the July 2019 IFR, SBA completed the second five-year rolling review of all monetary-based industry size standards, as required by section 1344 of the Jobs Act (Pub. L. 111-240, 124 Stat. 2504 (September 27, 2010)). The second five-year review of size standards coincided with the ongoing COVID-19 pandemic. In response to the pandemic and its impact on small businesses as well as the overall economy, SBA adopted the same policy it adopted in the first five-year review of size standards (completed in 2016) of only increasing size standards when the evaluation of the industry structure and Federal market conditions warranted an increase, and to maintain the current size standards for the industries where the analytical results suggested a reduction in size standard, or a retention of the applicable size standards at their current levels.

SBA is required to assess the impact of inflation on its monetary-based size standards
at least
once every five years (67 FR 3041; January 23, 2002) and 13 CFR 121.102(c)). In this rule, SBA is assessing the impact of the current general price increases on size standards before the normal five-year review for inflation is due, which would be 2024. Because of the important policy objective of maintaining the value of size standards in inflation-adjusted terms, this rulemaking contains interim final provisions further adjusting the size standards adopted in the recently completed second five-year comprehensive size standards review by an additional 13.65 percent, as discussed below.

The interim final provisions of this regulatory action provide assurances to the public that the Agency is monitoring inflation to determine whether to adjust size standards within a reasonable period since its last inflation adjustment and comprehensive size standards review as mandated by the Jobs Act. The inflation adjustments in this rule are separate from revisions to size standards made during the second five-year rolling reviews of size standards under the Jobs Act. The SBA's five-year size standards rolling reviews under the Jobs Act primarily focus on industry structure (
i.e.,
average firm size, startup costs and entry barriers, industry concentration, and distribution of firms by business size) and Federal contracting trends (
i.e.,
small business share of Federal contract dollars relative to small business share of total industry's receipts) for industries with significant contracting activities. In other words, SBA does not account for inflation as a factor in the five-year reviews of size standards under the Jobs Act. The 13.65 percent additional increase ensures that the recently reviewed monetary size standards under the Jobs Act are up-to-date for accurately determining small business status, and restores the eligibility of businesses that may have lost their small business status due solely to price level increases rather than from increases in business activity. Given the current developments in the U.S. economy, SBA will continue to monitor the inflation and other economic indicators and their impacts on size standards.

The monetary-based small business size standards adjusted for inflation in this rule include receipts-based size standards for 496 industries and nine subindustries (
i.e.,
“exceptions” in the SBA Table of Size Standards), as well as assets-based size standards for four industries.

Additionally, the interim final provisions of this rulemaking adjust three program-specific receipts-based size standards. These include the size standards for sales or leases of government property, the size standards for stockpile purchases, and the alternative size standard based on tangible net worth and net income for the Small Business Investment Company (SBIC) program.

Besides adjustment of industry and program-based monetary based size standards described above, the interim final provisions of this rule also adjust

other monetary thresholds primarily used in the 8(a) Business Development program (8(a) BD) and the Economically Disadvantaged Women-Owned Small Business (EDWOSB) program to determine eligibility of applicants and current participants as economically disadvantaged business concerns. These monetary thresholds have not previously been adjusted for inflation. This adjustment will permit small businesses to retain eligibility as economically disadvantaged business concerns for the 8(a) BD program and the EDWOSB, despite an increase in inflation. Several businesses may have lost small business eligibility for Federal assistance under SBA's monetary-based industry size standards or under these SBA programs, simply because of inflation-led revenue growth that has occurred since the recently finalized second five-year comprehensive review of size standards. This rule aims to reinstate those firms' small business eligibility for Federal assistance.

Updating size standards based on inflation—in addition to updating size standards based on the latest industry and Federal contracting data under the five-year rolling review—not only satisfies the Jobs Act's mandate that SBA review all size standards every five years, but also is consistent with Executive Order 13563 on improving regulation and regulatory review. This also fulfills the SBA's regulatory requirement to review size standards for inflation at least one time every five years.

II. SBA's Inflation Adjustment Methodology

Adjustment to Industry Size Standards
1

1
On September 29, 2022, SBA published a final rule to adopt the Office of Management and Budget (OMB) North American Industry Classification System revision for 2022, identified as NAICS 2022, for its size standards, effective October 1, 2022 (87 FR 59240). The OMB NAICS 2022 revision created 111 new industries with employee- and monetary-based size standards by reclassifying, combining, or splitting 156 NAICS 2017 industries or their parts. The NAICS 2022 revision created 71 new industries with monetary-based size standards involving 93 NAICS 2017 unique industries and their parts. SBA's size standards for those 71 new industries resulted in an increase in size standards for 12 industries and 27 parts of two industries under NAICS 2017, decrease in size standards for 53 parts of two industries, change in one size standard from average annual receipts to employees, and no change in size standards for 77 industries and 6 parts of 3 industries. In this rule, SBA is using NAICS 2022 as the basis of industry definitions for adjusting monetary-based industry size standards for inflation.

For the additional inflation adjustment of monetary size standards in this interim final rule, SBA has used the inflation adjustment methodology it describes in its “Size Standards Methodology” white paper, available at
www.sba.gov/size.
SBA applied the same methodology in its previous inflation adjustments, including the latest inflation adjustment in 2019. This methodology can be described in terms of the following steps:

1. Selecting an inflation measure.

2. Selecting the base and end periods.

3. Calculating the inflation rate.

4. Adjusting the monetary based size standards.

1. Selecting an Inflation Measure

SBA establishes small business size standards to determine the eligibility of businesses for a wide variety of SBA's and other Federal programs. Many businesses participating in those programs are engaged in multiple industries and are producing a wide range of goods and services. Therefore, it is important that the Agency use a broad measure of inflation to adjust its size standards. SBA's preferred measure of inflation has consistently been the chain-type price index for the U.S. Gross Domestic Product (GDP price index), published by the U.S. Department of Commerce, Bureau of Economic Analysis (BEA) on a quarterly basis as part of its National Income and Product Accounts (NIPA), available at
www.bea.gov.
2

2
As part of the 2014 inflation adjustment (79 FR 33647 (June 12, 2014)), SBA reviewed various measures of inflation published by the Federal Government, including the GDP price index, consumer price index (CPI), producer price index (PPI), personal consumption expenditures (PCE) price index, and unit labor cost. Based on that review, SBA determined that the GDP price index is the most appropriate measure of inflation for purposes of adjusting size standards for inflation. Historically, SBA has used the GDP price index for adjusting size standards for inflation.

2. Selecting the Base and End Periods

For this inflation adjustment, SBA selected the fourth quarter of 2018 as the base period because it was the end period for the 2019 inflation adjustment. SBA selected the second quarter of 2022 as the end period because it was the latest quarter for which GDP price index data were available when this rule was developed.

3. Calculating the Rate of Inflation

The GDP price index for the base period (
i.e.,
4th quarter of 2018) was 111.191 and, according to the BEA GDP advance estimate released on July 28, 2022 (the latest available when this rule was prepared), the GDP price index for the end period (
i.e.,
2nd quarter of 2022) was 126.367. Accordingly, inflation increased 13.65 percent from the fourth quarter of 2018 to the first quarter of 2022 (((126.367 ÷ 111.191) − 1) × 100 percent = 13.65 percent).

Making Adjustments to Size Standards

Adjustment to receipts-based industry size standards:
All receipts-based size standards were adjusted by multiplying their current levels by 1.1365 and rounding the results to the nearest $500,000 (except for the agricultural industries for which the results were rounded to the nearest $250,000).

Table 1, Receipts-Based Size Standards Adjusted for Inflation (NAICS 2022), shows all receipts-based size standards by six-digit NAICS 2022 industries. The third column shows the size standards adopted based on the second five-year rolling review under the Jobs Act, and the fourth column shows the unrounded size standards based on the additional 13.65 percent inflation adjustment. Calculated values for NAICS codes under Subsectors 111 (Crop Production) and 112 (Animal Production and Aquaculture), except NAICS 112112 (Cattle Feedlots) and 112310 (Chicken Egg Production), were rounded to the nearest $250,000. The rest of the industries (including NAICS 112112 and 112310) were rounded to the nearest $500,000. The rounded inflation-adjusted size standards are shown in the fifth column.

Table 1—Receipts-Based Size Standards Adjusted for Inflation
[NAICS 2022]

NAICS 2022 code
NAICS 2022 industry title

Current size standards
($ million)

Inflation-
adjusted size standards
(unrounded)
($ million)

Inflation-
adjusted size standards
(rounded)
($ million)

111110
Soybean Farming
2.0
2.27
2.25

111120
Oilseed (except Soybean) Farming
2.0
2.27
2.25

111130
Dry Pea and Bean Farming
2.5
2.84
2.75

111140
Wheat Farming
2.0
2.27
2.25

111150
Corn Farming
2.25
2.56
2.5

111160
Rice Farming
2.25
2.56
2.5

111191
Oilseed and Grain Combination Farming
2.0
2.27
2.25

111199
All Other Grain Farming
2.0
2.27
2.25

111211
Potato Farming
3.75
4.26
4.25

111219
Other Vegetable (except Potato) and Melon Farming
3.25
3.69
3.75

111310
Orange Groves
3.5
3.98
4.0

111320
Citrus (except Orange) Groves
3.75
4.26
4.25

111331
Apple Orchards
4.0
4.55
4.5

111332
Grape Vineyards
3.5
3.98
4.0

111333
Strawberry Farming
4.75
5.40
5.5

111334
Berry (except Strawberry) Farming
3.25
3.69
3.75

111335
Tree Nut Farming
3.25
3.69
3.75

111336
Fruit and Tree Nut Combination Farming
4.5
5.11
5.0

111339
Other Noncitrus Fruit Farming
3.0
3.41
3.5

111411
Mushroom Production
4.0
4.55
4.5

111419
Other Food Crops Grown Under Cover
4.0
4.55
4.5

111421
Nursery and Tree Production
2.75
3.13
3.25

111422
Floriculture Production
3.25
3.69
3.75

111910
Tobacco Farming
2.25
2.56
2.5

111920
Cotton Farming
2.75
3.13
3.25

111930
Sugarcane Farming
4.5
5.11
5.0

111940
Hay Farming
2.25
2.56
2.5

111991
Sugar Beet Farming
2.25
2.56
2.5

111992
Peanut Farming
2.25
2.56
2.5

111998
All Other Miscellaneous Crop Farming
2.25
2.56
2.5

112111
Beef Cattle Ranching and Farming
2.25
2.56
2.5

112112
Cattle Feedlots
19.5
22.16
22.0

112120
Dairy Cattle and Milk Production
3.25
3.69
3.75

112210
Hog and Pig Farming
3.5
3.98
4.0

112310
Chicken Egg Production
16.5
18.75
19.0

112320
Broilers and Other Meat Type Chicken Production
3.0
3.41
3.5

112330
Turkey Production
3.25
3.69
3.75

112340
Poultry Hatcheries
3.5
3.98
4.0

112390
Other Poultry Production
3.25
3.69
3.75

112410
Sheep Farming
3.0
3.41
3.5

112420
Goat Farming
2.25
2.56
2.5

112511
Finfish Farming and Fish Hatcheries
3.25
3.69
3.75

112512
Shellfish Farming
3.25
3.69
3.75

112519
Other Aquaculture
3.25
3.69
3.75

112910
Apiculture
2.75
3.13
3.25

112920
Horses and Other Equine Production
2.5
2.84
2.75

112930
Fur-Bearing Animal and Rabbit Production
3.25
3.69
3.75

112990
All Other Animal Production
2.5
2.84
2.75

113110
Timber Tract Operations
16.5
18.75
19.0

113210
Forest Nurseries and Gathering of Forest Products
18.0
20.46
20.5

114111
Finfish Fishing
22.0
25.0
25.0

114112
Shellfish Fishing
12.5
14.21
14.0

114119
Other Marine Fishing
10.0
11.36
11.5

114210
Hunting and Trapping
7.5
8.52
8.5

115111
Cotton Ginning
14.0
15.91
16.0

115112
Soil Preparation, Planting, and Cultivating
8.5
9.66
9.5

115113
Crop Harvesting, Primarily by Machine
12.0
13.64
13.5

115114
Postharvest Crop Activities (except Cotton Ginning)
30.0
34.09
34.0

115115
Farm Labor Contractors and Crew Leaders
16.5
18.75
19.0

115116
Farm Management Services
13.5
15.34
15.5

115210
Support Activities for Animal Production
9.5
10.80
11.0

115310
Support Activities for Forestry
10.0
11.36
11.5

115310 (Exception 1)
Forest Fire Suppression
30.0
34.09
34.0

115310 (Exception 2)
Fuels Management Services
30.0
34.09
34.0

213112
Support Activities for Oil and Gas Operations
41.5
47.16
47.0

213113
Support Activities for Coal Mining
24.0
27.28
27.5

213114
Support Activities for Metal Mining
36.0
40.91
41.0

213115
Support Activities for Nonmetallic Minerals (except Fuels)
18.0
20.46
20.5

221310
Water Supply and Irrigation Systems
36.0
40.91
41.0

221320
Sewage Treatment Facilities
31.0
35.23
35.0

221330
Steam and Air-Conditioning Supply
26.5
30.12
30.0

236115
New Single-family Housing Construction (Except For-Sale Builders)
39.5
44.89
45.0

236116
New Multifamily Housing Construction (except For-Sale Builders)
39.5
44.89
45.0

236117
New Housing For-Sale Builders
39.5
44.89
45.0

236118
Residential Remodelers
39.5
44.89
45.0

236210
Industrial Building Construction
39.5
44.89
45.0

236220
Commercial and Institutional Building Construction
39.5
44.89
45.0

237110
Water and Sewer Line and Related Structures Construction
39.5
44.89
45.0

237120
Oil and Gas Pipeline and Related Structures Construction
39.5
44.89
45.0

237130
Power and Communication Line and Related Structures Construction
39.5
44.89
45.0

237210
Land Subdivision
30.0
34.09
34.0

237310
Highway, Street, and Bridge Construction
39.5
44.89
45.0

237990
Other Heavy and Civil Engineering Construction
39.5
44.89
45.0

237990 (Exception)
Dredging and Surface Cleanup Activities
32.5
36.94
37.0

238110
Poured Concrete Foundation and Structure Contractors
16.5
18.75
19.0

238120
Structural Steel and Precast Concrete Contractors
16.5
18.75
19.0

238130
Framing Contractors
16.5
18.75
19.0

238140
Masonry Contractors
16.5
18.75
19.0

238150
Glass and Glazing Contractors
16.5
18.75
19.0

238160
Roofing Contractors
16.5
18.75
19.0

238170
Siding Contractors
16.5
18.75
19.0

238190
Other Foundation, Structure, and Building Exterior Contractors
16.5
18.75
19.0

238210
Electrical Contractors and Other Wiring Installation Contractors
16.5
18.75
19.0

238220
Plumbing, Heating, and Air Conditioning Contractors
16.5
18.75
19.0

238290
Other Building Equipment Contractors
19.5
22.16
22.0

238310
Drywall and Insulation Contractors
16.5
18.75
19.0

238320
Painting and Wall Covering Contractors
16.5
18.75
19.0

238330
Flooring Contractors
16.5
18.75
19.0

238340
Tile and Terrazzo Contractors
16.5
18.75
19.0

238350
Finish Carpentry Contractors
16.5
18.75
19.0

238390
Other Building Finishing Contractors
16.5
18.75
19.0

238910
Site Preparation Contractors
16.5
18.75
19.0

238990
All Other Specialty Trade Contractors
16.5
18.75
19.0

238990 (Exception)
Building and Property Specialty Trade Services
16.5
18.75
19.0

441120
Used Car Dealers
27.0
30.69
30.5

441210
Recreational Vehicle Dealers
35.0
39.78
40.0

441222
Boat Dealers
35.0
39.78
40.0

441227
Motorcycle, ATV, and All Other Motor Vehicle Dealers
35.0
39.78
40.0

441330
Automotive Parts and Accessories Retailers
25.0
28.41
28.5

441340
Tire Dealers
22.5
25.57
25.5

444110
Home Centers
41.5
47.16
47.0

444120
Paint and Wallpaper Retailers
30.0
34.09
34.0

444140
Hardware Retailers
14.5
16.48
16.5

444180
Other Building Material Dealers
22.0
25.0
25.0

444230
Outdoor Power Equipment Retailers
8.5
9.66
9.5

444240
Nursery, Garden Center, and Farm Supply Retailers
19.0
21.59
21.5

445110
Supermarkets and Other Grocery Retailers (except Convenience Retailers)
35.0
39.78
40.0

445131
Convenience Retailers
32.0
36.37
36.5

445132
Vending Machine Operators
18.5
21.02
21.0

445230
Fruit and Vegetable Retailers
8.0
9.09
9.0

445240
Meat Retailers
8.0
9.09
9.0

445250
Fish and Seafood Retailers
8.0
9.09
9.0

445291
Baked Goods Retailers
14.0
15.91
16.0

445292
Confectionery and Nut Retailers
17.0
19.32
19.5

445298
All Other Specialty Food Retailers
9.0
10.23
10.0

445320
Beer, Wine, and Liquor Retailers
9.0
10.23
10.0

449110
Furniture Retailers
22.0
25.0
25.0

449121
Floor Covering Retailers
8.0
9.09
9.0

449122
Window Treatment Retailers
10.0
11.36
11.5

449129
All Other Home Furnishings Retailers
29.5
33.53
33.5

449210
Electronics and Appliance Retailers
35.0
39.78
40.0

455110
Department Stores
35.0
39.78
40.0

455211
Warehouse Clubs and Supercenters
41.5
47.16
47.0

455219
All Other General Merchandise Retailers
35.0
39.78
40.0

456110
Pharmacies and Drug Retailers
33.0
37.50
37.5

456120
Cosmetics, Beauty Supplies, and Perfume Retailers
30.0
34.09
34.0

456130
Optical Goods Retailers
26.0
29.55
29.5

456191
Food (Health) Supplement Retailers
20.0
22.73
22.5

456199
All Other Health and Personal Care Retailers
8.5
9.66
9.5

457110
Gasoline Stations with Convenience Stores
32.0
36.37
36.5

457120
Other Gasoline Stations
29.5
33.53
33.5

458110
Clothing and Clothing Accessories Retailers
41.5
47.16
47.0

458210
Shoe Retailers
30.0
34.09
34.0

458310
Jewelry Retailers
18.0
20.46
20.5

458320
Luggage and Leather Goods Retailers
33.5
38.07
38.0

459110
Sporting Goods Retailers
23.5
26.71
26.5

459120
Hobby, Toy, and Game Retailers
31.0
35.23
35.0

459130
Sewing, Needlework, and Piece Goods Retailers
30.0
34.09
34.0

459140
Musical Instrument and Supplies Retailers
20.0
22.73
22.5

459210
Book Retailers and News Dealers
31.5
35.80
36.0

459310
Florists
8.0
9.09
9.0

459410
Office Supplies and Stationery Retailers
35.0
39.78
40.0

459420
Gift, Novelty, and Souvenir Retailers
12.0
13.64
13.5

459510
Used Merchandise Retailers
12.5
14.21
14.0

459910
Pet and Pet Supplies Retailers
28.0
31.82
32.0

459920
Art Dealers
14.5
16.48
16.5

459930
Manufactured (Mobile) Home Dealers
16.5
18.75
19.0

459991
Tobacco, Electronic Cigarette, and Other Smoking Supplies Retailers
10.0
11.36
11.5

459999
All Other Miscellaneous Retailers
10.0
11.36
11.5

481219
Other Nonscheduled Air Transportation
22.0
25.0
25.0

484110
General Freight Trucking, Local
30.0
34.09
34.0

484121
General Freight Trucking, Long Distance, Truckload
30.0
34.09
34.0

484122
General Freight Trucking, Long Distance, Less Than Truckload
38.0
43.19
43.0

484210
Used Household and Office Goods Moving
30.0
34.09
34.0

484220
Specialized Freight (except Used Goods) Trucking, Local
30.0
34.09
34.0

484230
Specialized Freight (except Used Goods) Trucking, Long Distance
30.0
34.09
34.0

485111
Mixed Mode Transit Systems
25.5
28.98
29.0

485112
Commuter Rail Systems
41.5
47.16
47.0

485113
Bus and Other Motor Vehicle Transit Systems
28.5
32.39
32.5

485119
Other Urban Transit Systems
33.0
37.50
37.5

485210
Interurban and Rural Bus Transportation
28.0
31.82
32.0

485310
Taxi and Ridesharing Services
16.5
18.75
19.0

485320
Limousine Service
16.5
18.75
19.0

485410
School and Employee Bus Transportation
26.5
30.12
30.0

485510
Charter Bus Industry
16.5
18.75
19.0

485991
Special Needs Transportation
16.5
18.75
19.0

485999
All Other Transit and Ground Passenger Transportation
16.5
18.75
19.0

486210
Pipeline Transportation of Natural Gas
36.5
41.48
41.5

486990
All Other Pipeline Transportation
40.5
46.03
46.0

487110
Scenic and Sightseeing Transportation, Land
18.0
20.46
20.5

487210
Scenic and Sightseeing Transportation, Water
12.5
14.21
14.0

487990
Scenic and Sightseeing Transportation, Other
22.0
25.0
25.0

488111
Air Traffic Control
35.0
39.78
40.0

488119
Other Airport Operations
35.0
39.78
40.0

488190
Other Support Activities for Air Transportation
35.0
39.78
40.0

488210
Support Activities for Rail Transportation
30.0
34.09
34.0

488310
Port and Harbor Operations
41.5
47.16
47.0

488320
Marine Cargo Handling
41.5
47.16
47.0

488330
Navigational Services to Shipping
41.5
47.16
47.0

488390
Other Support Activities for Water Transportation
41.5
47.16
47.0

488410
Motor Vehicle Towing
8.0
9.09
9.0

488490
Other Support Activities for Road Transportation
16.0
18.18
18.0

488510
Freight Transportation Arrangement
17.5
19.89
20.0

488510 (Exception)
Non Vessel Owning Common Carriers and Household Goods Forwarders
30.0
34.09
34.0

488991
Packing and Crating
30.0
34.09
34.0

488999
All Other Support Activities for Transportation
22.0
25.0
25.0

491110
Postal Service
8.0
9.09
9.0

492210
Local Messengers and Local Delivery
30.0
34.09
34.0

493110
General Warehousing and Storage
30.0
34.09
34.0

493120
Refrigerated Warehousing and Storage
32.0
36.37
36.5

493130
Farm Product Warehousing and Storage
30.0
34.09
34.0

493190
Other Warehousing and Storage
32.0
36.37
36.5

512110
Motion Picture and Video Production
35.0
39.78
40.0

512120
Motion Picture and Video Distribution
34.5
39.21
39.0

512131
Motion Picture Theaters (except Drive Ins)
41.5
47.16
47.0

512132
Drive In Motion Picture Theaters
11.0
12.50
12.5

512191
Teleproduction and Other Postproduction Services
34.5
39.21
39.0

512199
Other Motion Picture and Video Industries
25.0
28.41
28.5

512240
Sound Recording Studios
9.5
10.80
11.0

512290
Other Sound Recording Industries
20.0
22.73
22.5

513210
Software Publishers
41.5
47.16
47.0

516110
Radio Broadcasting Stations
41.5
47.16
47.0

516120
Television Broadcasting Stations
41.5
47.16
47.0

516210
Media Streaming Distribution Services, Social Networks, and Other Media Networks and Content Providers
41.5
47.16
47.0

517410
Satellite Telecommunications
38.5
43.75
44.0

517810
All Other Telecommunications
35.0
39.78
40.0

518210
Computing Infrastructure Providers, Data Processing, Web Hosting, and Related Services
35.0
39.78
40.0

519210
Libraries and Archives
18.5
21.02
21.0

522220
Sales Financing
41.5
47.16
47.0

522291
Consumer Lending
41.5
47.16
47.0

522292
Real Estate Credit
41.5
47.16
47.0

522299
International, Secondary Market, and All Other Nondepository Credit Intermediation
41.5
47.16
47.0

522310
Mortgage and Nonmortgage Loan Brokers
13.0
14.77
15.0

522320
Financial Transactions Processing, Reserve, and Clearinghouse Activities
41.5
47.16
47.0

522390
Other Activities Related to Credit Intermediation
25.0
28.41
28.5

523150
Investment Banking and Securities Intermediation
41.5
47.16
47.0

523160
Commodity Contracts Intermediation
41.5
47.16
47.0

523210
Securities and Commodity Exchanges
41.5
47.16
47.0

523910
Miscellaneous Intermediation
41.5
47.16
47.0

523940
Portfolio Management and Investment Advice
41.5
47.16
47.0

523991
Trust, Fiduciary and Custody Activities
41.5
47.16
47.0

523999
Miscellaneous Financial Investment Activities
41.5
47.16
47.0

524113
Direct Life Insurance Carriers
41.5
47.16
47.0

524114
Direct Health and Medical Insurance Carriers
41.5
47.16
47.0

524127
Direct Title Insurance Carriers
41.5
47.16
47.0

524128
Other Direct Insurance (except Life, Health and Medical) Carriers
41.5
47.16
47.0

524130
Reinsurance Carriers
41.5
47.16
47.0

524210
Insurance Agencies and Brokerages
13.0
14.77
15.0

524291
Claims Adjusting
22.0
25.0
25.0

524292
Pharmacy Benefit Management and Other Third Party Administration of Insurance and Pension Funds
40.0
45.46
45.5

524298
All Other Insurance Related Activities
27.0
30.69
30.5

525110
Pension Funds
35.0
39.78
40.0

525120
Health and Welfare Funds
35.0
39.78
40.0

525190
Other Insurance Funds
35.0
39.78
40.0

525910
Open End Investment Funds
35.0
39.78
40.0

525920
Trusts, Estates, and Agency Accounts
35.0
39.78
40.0

525990
Other Financial Vehicles
35.0
39.78
40.0

531110
Lessors of Residential Buildings and Dwellings
30.0
34.09
34.0

531120
Lessors of Nonresidential Buildings (except Miniwarehouses)
30.0
34.09
34.0

531130
Lessors of Miniwarehouses and Self Storage Units
30.0
34.09
34.0

531190
Lessors of Other Real Estate Property
30.0
34.09
34.0

531210
Offices of Real Estate Agents and Brokers
13.0
14.77
15.0

531311
Residential Property Managers
11.0
12.50
12.5

531312
Nonresidential Property Managers
17.0
19.32
19.5

531320
Offices of Real Estate Appraisers
8.5
9.66
9.5

531390
Other Activities Related to Real Estate
17.0
19.32
19.5

532111
Passenger Car Rental
41.5
47.16
47.0

532112
Passenger Car Leasing
41.5
47.16
47.0

532120
Truck, Utility Trailer, and RV (Recreational Vehicle) Rental and Leasing
41.5
47.16
47.0

532210
Consumer Electronics and Appliances Rental
41.5
47.16
47.0

532281
Formal Wear and Costume Rental
22.0
25.0
25.0

532282
Video Tape and Disc Rental
31.0
35.23
35.0

532283
Home Health Equipment Rental
36.0
40.91
41.0

532284
Recreational Goods Rental
8.0
9.09
9.0

532289
All Other Consumer Goods Rental
11.0
12.50
12.5

532310
General Rental Centers
8.0
9.09
9.0

532411
Commercial Air, Rail, and Water Transportation Equipment Rental and Leasing
40.0
45.46
45.5

532412
Construction, Mining and Forestry Machinery and Equipment Rental and Leasing
35.0
39.78
40.0

532420
Office Machinery and Equipment Rental and Leasing
35.0
39.78
40.0

532490
Other Commercial and Industrial Machinery and Equipment Rental and Leasing
35.0
39.78
40.0

533110
Lessors of Nonfinancial Intangible Assets (except Copyrighted Works)
41.5
47.16
47.0

541110
Offices of Lawyers
13.5
15.34
15.5

541191
Title Abstract and Settlement Offices
17.0
19.32
19.5

541199
All Other Legal Services
18.0
20.46
20.5

541211
Offices of Certified Public Accountants
23.5
26.71
26.5

541213
Tax Preparation Services
22.0
25.0
25.0

541214
Payroll Services
34.5
39.21
39.0

541219
Other Accounting Services
22.0
25.0
25.0

541310
Architectural Services
11.0
12.50
12.5

541320
Landscape Architectural Services
8.0
9.09
9.0

541330
Engineering Services
22.5
25.57
25.5

541330 (Exception 1)
Military and Aerospace Equipment and Military Weapons
41.5
47.16
47.0

541330 (Exception 2)
Contracts and Subcontracts for Engineering Services Awarded Under the National Energy Policy Act of 1992
41.5
47.16
47.0

541330 (Exception 3)
Marine Engineering and Naval Architecture
41.5
47.16
47.0

541340
Drafting Services
8.0
9.09
9.0

541350
Building Inspection Services
10.0
11.36
11.5

541360
Geophysical Surveying and Mapping Services
25.0
28.41
28.5

541370
Surveying and Mapping (except Geophysical) Services
16.5
18.75
19.0

541380
Testing Laboratories and Services
16.5
18.75
19.0

541410
Interior Design Services
8.0
9.09
9.0

541420
Industrial Design Services
15.0
17.05
17.0

541430
Graphic Design Services
8.0
9.09
9.0

541490
Other Specialized Design Services
12.0
13.64
13.5

541511
Custom Computer Programming Services
30.0
34.09
34.0

541512
Computer Systems Design Services
30.0
34.09
34.0

541513
Computer Facilities Management Services
32.5
36.94
37.0

541519
Other Computer Related Services
30.0
34.09
34.0

541611
Administrative Management and General Management Consulting Services
21.5
24.43
24.5

541612
Human Resources Consulting Services
25.5
28.98
29.0

541613
Marketing Consulting Services
16.5
18.75
19.0

541614
Process, Physical Distribution and Logistics Consulting Services
17.5
19.89
20.0

541618
Other Management Consulting Services
16.5
18.75
19.0

541620
Environmental Consulting Services
16.5
18.75
19.0

541690
Other Scientific and Technical Consulting Services
16.5
18.75
19.0

541720
Research and Development in the Social Sciences and Humanities
24.5
27.84
28.0

541810
Advertising Agencies
22.5
25.57
25.5

541820
Public Relations Agencies
16.5
18.75
19.0

541830
Media Buying Agencies
28.5
32.39
32.5

541840
Media Representatives
18.5
21.02
21.0

541850
Indoor and Outdoor Display Advertising
30.5
34.66
34.5

541860
Direct Mail Advertising
19.5
22.16
22.0

541870
Advertising Material Distribution Services
25.0
28.41
28.5

541890
Other Services Related to Advertising
16.5
18.75
19.0

541910
Marketing Research and Public Opinion Polling
20.0
22.73
22.5

541921
Photography Studios, Portrait
14.0
15.91
16.0

541922
Commercial Photography
8.0
9.09
9.0

541930
Translation and Interpretation Services
20.0
22.73
22.5

541940
Veterinary Services
9.0
10.23
10.0

541990
All Other Professional, Scientific and Technical Services
17.0
19.32
19.5

551111
Offices of Bank Holding Companies
34.0
38.64
38.5

551112
Offices of Other Holding Companies
40.0
45.46
45.5

561110
Office Administrative Services
11.0
12.50
12.5

561210
Facilities Support Services
41.5
47.16
47.0

561311
Employment Placement Agencies
30.0
34.09
34.0

561312
Executive Search Services
30.0
34.09
34.0

561320
Temporary Help Services
30.0
34.09
34.0

561330
Professional Employer Organizations
36.5
41.48
41.5

561410
Document Preparation Services
16.5
18.75
19.0

561421
Telephone Answering Services
16.5
18.75
19.0

561422
Telemarketing Bureaus and Other contact Centers
22.5
25.57
25.5

561431
Private Mail Centers
16.5
18.75
19.0

561439
Other Business Service Centers (including Copy Shops)
23.5
26.71
26.5

561440
Collection Agencies
17.0
19.32
19.5

561450
Credit Bureaus
36.0
40.91
41.0

561491
Repossession Services
16.5
18.75
19.0

561492
Court Reporting and Stenotype Services
16.5
18.75
19.0

561499
All Other Business Support Services
19.0
21.59
21.5

561510
Travel Agencies
22.0
25.0
25.0

561520
Tour Operators
22.0
25.0
25.0

561591
Convention and Visitors Bureaus
22.0
25.0
25.0

561599
All Other Travel Arrangement and Reservation Services
28.5
32.39
32.5

561611
Investigation and Personal Background Check Services
22.0
25.0
25.0

561612
Security Guards and Patrol Services
25.5
28.98
29.0

561613
Armored Car Services
38.0
43.19
43.0

561621
Security Systems Services (except Locksmiths)
22.0
25.0
25.0

561622
Locksmiths
22.0
25.0
25.0

561710
Exterminating and Pest Control Services
15.5
17.62
17.5

561720
Janitorial Services
19.5
22.16
22.0

561730
Landscaping Services
8.5
9.66
9.5

561740
Carpet and Upholstery Cleaning Services
7.5
8.52
8.5

561790
Other Services to Buildings and Dwellings
8.0
9.09
9.0

561910
Packaging and Labeling Services
17.0
19.32
19.5

561920
Convention and Trade Show Organizers
17.5
19.89
20.0

561990
All Other Support Services
14.5
16.48
16.5

562111
Solid Waste Collection
41.5
47.16
47.0

562112
Hazardous Waste Collection
41.5
47.16
47.0

562119
Other Waste Collection
41.5
47.16
47.0

562211
Hazardous Waste Treatment and Disposal
41.5
47.16
47.0

562212
Solid Waste Landfill
41.5
47.16
47.0

562213
Solid Waste Combustors and Incinerators
41.5
47.16
47.0

562219
Other Nonhazardous Waste Treatment and Disposal
41.5
47.16
47.0

562910
Remediation Services
22.0
25.0
25.0

562920
Materials Recovery Facilities
22.0
25.0
25.0

562991
Septic Tank and Related Services
8.0
9.09
9.0

562998
All Other Miscellaneous Waste Management Services
14.5
16.48
16.5

611110
Elementary and Secondary Schools
17.5
19.89
20.0

611210
Junior Colleges
28.5
32.39
32.5

611310
Colleges, Universities and Professional Schools
30.5
34.66
34.5

611410
Business and Secretarial Schools
18.0
20.46
20.5

611420
Computer Training
14.0
15.91
16.0

611430
Professional and Management Development Training
13.0
14.77
15.0

611511
Cosmetology and Barber Schools
11.5
13.07
13.0

611512
Flight Training
30.0
34.09
34.0

611513
Apprenticeship Training
10.0
11.36
11.5

611519
Other Technical and Trade Schools
18.5
21.02
21.0

611519 (Exception)
Job Corps Centers
41.5
47.16
47.0

611610
Fine Arts Schools
8.0
9.09
9.0

611620
Sports and Recreation Instruction
8.0
9.09
9.0

611630
Language Schools
18.0
20.46
20.5

611691
Exam Preparation and Tutoring
11.0
12.50
12.5

611692
Automobile Driving Schools
9.0
10.23
10.0

611699
All Other Miscellaneous Schools and Instruction
14.5
16.48
16.5

611710
Educational Support Services
21.0
23.87
24.0

621111
Offices of Physicians (except Mental Health Specialists)
14.0
15.91
16.0

621112
Offices of Physicians, Mental Health Specialists
12.0
13.64
13.5

621210
Offices of Dentists
8.0
9.09
9.0

621310
Offices of Chiropractors
8.0
9.09
9.0

621320
Offices of Optometrists
8.0
9.09
9.0

621330
Offices of Mental Health Practitioners (except Physicians)
8.0
9.09
9.0

621340
Offices of Physical, Occupational and Speech Therapists and Audiologists
11.0
12.50
12.5

621391
Offices of Podiatrists
8.0
9.09
9.0

621399
Offices of All Other Miscellaneous Health Practitioners
9.0
10.23
10.0

621410
Family Planning Centers
16.5
18.75
19.0

621420
Outpatient Mental Health and Substance Abuse Centers
16.5
18.75
19.0

621491
HMO Medical Centers
39.0
44.32
44.5

621492
Kidney Dialysis Centers
41.5
47.16
47.0

621493
Freestanding Ambulatory Surgical and Emergency Centers
16.5
18.75
19.0

621498
All Other Outpatient Care Centers
22.5
25.57
25.5

621511
Medical Laboratories
36.5
41.48
41.5

621512
Diagnostic Imaging Centers
16.5
18.75
19.0

621610
Home Health Care Services
16.5
18.75
19.0

621910
Ambulance Services
20.0
22.73
22.5

621991
Blood and Organ Banks
35.0
39.78
40.0

621999
All Other Miscellaneous Ambulatory Health Care Services
18.0
20.46
20.5

622110
General Medical and Surgical Hospitals
41.5
47.16
47.0

622210
Psychiatric and Substance Abuse Hospitals
41.5
47.16
47.0

622310
Specialty (except Psychiatric and Substance Abuse) Hospitals
41.5
47.16
47.0

623110
Nursing Care Facilities (Skilled Nursing Facilities)
30.0
34.09
34.0

623210
Residential Intellectual and Developmental Disability Facilities
16.5
18.75
19.0

623220
Residential Mental Health and Substance Abuse Facilities
16.5
18.75
19.0

623311
Continuing Care Retirement Communities
30.0
34.09
34.0

623312
Assisted Living Facilities for the Elderly
20.5
23.30
23.5

623990
Other Residential Care Facilities
14.0
15.91
16.0

624110
Child and Youth Services
13.5
15.34
15.5

624120
Services for the Elderly and Persons with Disabilities
13.0
14.77
15.0

624190
Other Individual and Family Services
14.0
15.91
16.0

624210
Community Food Services
17.0
19.32
19.5

624221
Temporary Shelters
12.0
13.64
13.5

624229
Other Community Housing Services
16.5
18.75
19.0

624230
Emergency and Other Relief Services
36.5
41.48
41.5

624310
Vocational Rehabilitation Services
13.0
14.77
15.0

624410
Child Care Services
8.5
9.66
9.5

711110
Theater Companies and Dinner Theaters
22.0
25.0
25.0

711120
Dance Companies
16.0
18.18
18.0

711130
Musical Groups and Artists
13.0
14.77
15.0

711190
Other Performing Arts Companies
30.0
34.09
34.0

711211
Sports Teams and Clubs
41.5
47.16
47.0

711212
Race Tracks
41.5
47.16
47.0

711219
Other Spectator Sports
14.5
16.48
16.5

711310
Promoters of Performing Arts, Sports and Similar Events with Facilities
35.0
39.78
40.0

711320
Promoters of Performing Arts, Sports and Similar Events without Facilities
19.5
22.16
22.0

711410
Agents and Managers for Artists, Athletes, Entertainers and Other Public Figures
15.5
17.62
17.5

711510
Independent Artists, Writers, and Performers
8.0
9.09
9.0

712110
Museums
30.0
34.09
34.0

712120
Historical Sites
11.5
13.07
13.0

712130
Zoos and Botanical Gardens
30.0
34.09
34.0

712190
Nature Parks and Other Similar Institutions
17.0
19.32
19.5

713110
Amusement and Theme Parks
41.5
47.16
47.0

713120
Amusement Arcades
8.0
9.09
9.0

713210
Casinos (except Casino Hotels)
30.0
34.09
34.0

713290
Other Gambling Industries
35.0
39.78
40.0

713910
Golf Courses and Country Clubs
16.5
18.75
19.0

713920
Skiing Facilities
31.0
35.23
35.0

713930
Marinas
9.5
10.80
11.0

713940
Fitness and Recreational Sports Centers
15.5
17.62
17.5

713950
Bowling Centers
11.0
12.50
12.5

713990
All Other Amusement and Recreation Industries
8.0
9.09
9.0

721110
Hotels (except Casino Hotels) and Motels
35.0
39.78
40.0

721120
Casino Hotels
35.0
39.78
40.0

721191
Bed and Breakfast Inns
8.0
9.09
9.0

721199
All Other Traveler Accommodation
8.0
9.09
9.0

721211
RV (Recreational Vehicle) Parks and Campgrounds
9.0
10.23
10.0

721214
Recreational and Vacation Camps (except Campgrounds)
8.0
9.09
9.0

721310
Rooming and Boarding Houses, Dormitories, and Workers' Camps
12.5
14.21
14.0

722310
Food Service Contractors
41.5
47.16
47.0

722320
Caterers
8.0
9.09
9.0

722330
Mobile Food Services
8.0
9.09
9.0

722410
Drinking Places (Alcoholic Beverages)
8.0
9.09
9.0

722511
Full-Service Restaurants
10.0
11.36
11.5

722513
Limited-Service Restaurants
12.0
13.64
13.5

722514
Cafeterias, Grill Buffets, and Buffets
30.0
34.09
34.0

722515
Snack and Nonalcoholic Beverage Bars
20.0
22.73
22.5

811111
General Automotive Repair
8.0
9.09
9.0

811114
Specialized Automotive Repair
8.0
9.09
9.0

811121
Automotive Body, Paint and Interior Repair and Maintenance
8.0
9.09
9.0

811122
Automotive Glass Replacement Shops
15.5
17.62
17.5

811191
Automotive Oil Change and Lubrication Shops
9.5
10.80
11.0

811192
Car Washes
8.0
9.09
9.0

811198
All Other Automotive Repair and Maintenance
9.0
10.23
10.0

811210
Electronic and Precision Equipment Repair and Maintenance
30.0
34.09
34.0

811310
Commercial and Industrial Machinery and Equipment (except Automotive and Electronic) Repair and Maintenance
11.0
12.50
12.5

811411
Home and Garden Equipment Repair and Maintenance
8.0
9.09
9.0

811412
Appliance Repair and Maintenance
16.5
18.75
19.0

811420
Reupholstery and Furniture Repair
8.0
9.09
9.0

811430
Footwear and Leather Goods Repair
8.0
9.09
9.0

811490
Other Personal and Household Goods Repair and Maintenance
8.0
9.09
9.0

812111
Barber Shops
8.5
9.66
9.5

812112
Beauty Salons
8.5
9.66
9.5

812113
Nail Salons
8.0
9.09
9.0

812191
Diet and Weight Reducing Centers
24.0
27.28
27.5

812199
Other Personal Care Services
8.0
9.09
9.0

812210
Funeral Homes and Funeral Services
11.0
12.50
12.5

812220
Cemeteries and Crematories
22.0
25.0
25.0

812310
Coin Operated Laundries and Drycleaners
11.5
13.07
13.0

812320
Drycleaning and Laundry Services (except Coin Operated)
7.0
7.96
8.0

812331
Linen Supply
35.0
39.78
40.0

812332
Industrial Launderers
41.5
47.16
47.0

812910
Pet Care (except Veterinary) Services
8.0
9.09
9.0

812921
Photofinishing Laboratories (except One Hour)
26.0
29.55
29.5

812922
One Hour Photofinishing
16.5
18.75
19.0

812930
Parking Lots and Garages
41.5
47.16
47.0

812990
All Other Personal Services
13.0
14.77
15.0

813110
Religious Organizations
11.5
13.07
13.0

813211
Grantmaking Foundations
35.0
39.78
40.0

813212
Voluntary Health Organizations
30.0
34.09
34.0

813219
Other Grantmaking and Giving Services
41.5
47.16
47.0

813311
Human Rights Organizations
30.0
34.09
34.0

813312
Environment, Conservation and Wildlife Organizations
17.0
19.32
19.5

813319
Other Social Advocacy Organizations
16.0
18.18
18.0

813410
Civic and Social Organizations
8.5
9.66
9.5

813910
Business Associations
13.5
15.34
15.5

813920
Professional Organizations
20.5
23.30
23.5

813930
Labor Unions and Similar Labor Organizations
14.5
16.48
16.5

813940
Political Organizations
12.5
14.21
14.0

813990
Other Similar Organizations (except Business, Professional, Labor, and Political Organizations)
12.0
13.64
13.5

Adjustment to the assets-based size standards:

Currently, five industries in NAICS Sector 52, Finance and Insurance, have the size standard of $750 million in average assets. Following the inflation adjustment methodology described above, the assets-based size standard was adjusted by multiplying the current value of $750 million by 1.1365. The result was $852.4 million, which SBA rounded to $850 million. Table 2, Inflation Adjustment to Assets-Based Size Standards, shows the four industries with assets-based standards.

Table 2—Inflation Adjustments to Assets-Based Size Standards

NAICS 2022 code
NAICS 2022 industry title

Current
assets-based size standard
($ million)

Inflation-
adjusted
assets-based size standard
(unrounded)
($ million

Inflation-
adjusted
assets-based size standard
(rounded)
($ million)

522110
Commercial Banking
$750.0
$852.4
$850.0

522130
Credit Unions
750.0
852.4
850.0

522180
Savings Institution and Other Depository Credit Intermediation
750.0
852.4
850.0

522210
Credit Card Issuing
750.0
852.4
850.0

Adjustment to Program-Based Size Standards

Most SBA and other Federal programs apply size standards established for industries, as defined by the NAICS. SBA has also established a few size standards on a program basis rather than on an industry basis. These include the size standards for sales or leases of government property, the size standards for stockpile purchases, and the alternative size standard based on tangible net worth and net income for the Small Business Investment Company (SBIC) program. Size standards for sales or leases of government property and stockpile purchases were adjusted for inflation in the same manner as the industry-based monetary size standards. These results are presented in Table 3, Inflation Adjustment to Program-Based Size Standards, which shows the program-based size standards and their corresponding inflation-adjusted values. The alternative size standard for the SBIC program was not adjusted in the 2019 inflation adjustment but it was adjusted in the 2014 inflation adjustment. Thus, the base period for adjusting the SBIC alternative size standard is the fourth quarter of 2013, the end period for the 2014 inflation adjustment of that size standard. The end period is the second quarter of 2022. As shown in Table 3, the inflation between the base period and end period for the adjustment of SBIC alternative size standard is 23.22 percent. Thus, following the inflation adjustment methodology described above, the SBIC alternative size standard was adjusted by multiplying the current tangible net worth value of $19.5 million and net income value of $6.5 million by 1.2063. The results were $24.029 million in tangible net worth and $8.010 million in net income, which were rounded to $24 million and $8 million, respectively. These results are shown in Table 3, below. The size standard for “smaller enterprises” under the SBIC program is set by statute (
see
13 CFR 107.710(a)) and, therefore, it is not adjusted.

Table 3—Inflation Adjustment to Program-Based Size Standards

Threshold name and value
(CFR citation)

Name
Value
Base period and GDP price index
Base period
GDP price index
End period and GDP price index
End period
GDP price index

Inflation
(%)

Adjusted threshold
(not rounded)

Adjusted threshold

(rounded)
1

Sales or leases of government property (13 CFR 121.502)
$8,000,000
Fourth quarter of 2018
111.191
Second Quarter of 2022
126.367
13.65
$9,091,886
$9,000,000

Stockpile purchases (13 CFR 121.512)
$67,500,000
Fourth quarter of 2018
111.191
Second Quarter of 2022
126.367
13.65
$76,712,796
$76,500,000

SBIC alternative size threshold:

Net worth (13 CFR 121.301(c))
$19,500,000
Fourth quarter of 2013
102.550
Second quarter of 2022
126.367
23.22
$24,028,830
$24,000,000

Net income (13 CFR 121.301(c))
$6,500,000
Fourth quarter of 2013
102.550
Second quarter of 2022
126.367
23.22
$8,009,610
$8,000,000

1
If value < 1,000,000, then it was rounded to the nearest 50,000.

If value >= 1,000,000, then it was rounded to the nearest 500,000.

Special Considerations

Size Standard for Leasing of Building Space to the Federal Government by Owners—Footnote 9:
The size standard found in Footnote 9 to 13 CFR 121.201 (Leasing of Building Space to the Federal Government by Owners) was also adjusted for inflation. The current size standard of $41.5 million was multiplied by 1.1365 to obtain an adjusted size standard of $47 million after rounding. This size standard exception applies to all four industries in NAICS Industry Group 5311, Lessors of Real Estate.

Alternative Size Standard for 7(a) and 504 Loan Programs:
Effective September 27, 2010, the Jobs Act established a new temporary alternative size standard of tangible net worth of not more than $15 million and net income of not more than $5 million for SBA's 7(a) and 504 Loan Programs. On September 29, 2010, SBA issued Notice 5000-1175 advising lenders and the public that, effective September 27, 2010, the new statutory alternative size standard will apply for its 7(a) and 504 Loan Programs, thereby replacing the existing alternative size standard set forth in 13 CFR 121.301(b)(2). The Jobs Act also provided that the new temporary alternative size standard would remain in effect for the 7(a) and CDC/504 Loan Programs until the SBA's Administrator has established a different size standard through rulemaking. For this reason, in this rule, SBA is not adjusting the new alternative size standard for its 7(a) and 504 Loan programs for inflation. SBA will issue a different rule to establish a permanent alternative size standard for those programs.

Adjustment of Certain Procurement Thresholds for Inflation

Besides adjustment of industry-based and certain program-based monetary based size standards described above, in this rule, SBA is also adjusting certain monetary thresholds in its regulations that are otherwise not adjusted for inflation under FAR 1.109. These thresholds primarily are those used in the 8(a) Business Development (8(a) BD) and economically disadvantaged women-owned small business (EDWOSB) programs to determine economic disadvantage. Others are used to maintain eligibility for the 8(a) BD program. This action will permit small businesses to retain eligibility as economically disadvantaged and eligible for the 8(a) BD program and the EDWOSB program, despite an increase in inflation.

Economic Disadvantage for 8(a) Business Development

Net worth:
Under the current regulations, the net worth of an individual claiming economic disadvantage must be less than $750,000 (13 CFR 124.104(c)(2)). This was implemented in 2020 (85 FR 27650 (May 11, 2020)), when SBA adopted a common definition for an economically disadvantaged individual under the 8(a) BD program as well as under the EDWOSB program. Inflation, as measured by change in the GDP price index, since then has increased 11.86 percent. These results are presented in Table 4, Inflation Adjustments of Certain Procurement Thresholds, below. The adjustment of $750,000 by that amount would translate to $838,942, rounded to $850,000.

Aggregate Gross Income (AGI):
Currently, SBA presumes that an individual is not economically disadvantaged if his or her adjusted gross income (AGI) averaged over the three preceding years exceeds $350,000 (13 CFR 124.104(c)(3)(i)). This was implemented in 2020 (85 FR 27650 (May 11, 2020)). Inflation, as measured by change in the GDP price index, since then has increased 11.86 percent (see Table 4 below). The adjustment of $350,000 by that amount would translate to $391,506, which is rounded to $400,000.

Total assets:
Currently, an individual is generally not considered economically disadvantaged if the fair market value of all his or her assets (including his or her primary residence and the value of the applicant/Participant firm) exceeds $6,000,000 (13 CFR 124.104(c)(4)). This was implemented in 2020 (85 FR 27650 (May 11, 2020)). Inflation, as measured by change in the GDP price index, since then has increased 11.86 percent (see Table 4 below). The adjustment of $6,000,000 by that amount would translate to $6,711,534, which is rounded to $6,500,000.

Economic Disadvantage Thresholds for EDWOSB Program

Net worth:
In order to be considered economically disadvantaged, the woman's personal net worth must be less than $750,000, excluding her ownership interest in the concern and her equity interest in her primary personal residence (13 CFR 127.203(b)(1)). SBA implemented this threshold in 2020, when the final rule implementing the WOSB and EDWOSB certification program was published (85 FR 27650 (May 11, 2020)). Inflation, as measured by change in the GDP price index, since then has increased 11.86 percent. Adjusting $750,000 with that amount translates to $850,000 (rounded). These results are provided in Table 4, below.

Income:
When considering a woman's personal income, if the adjusted gross yearly income averaged over the three years preceding the certification exceeds $350,000, SBA will presume that she is not economically disadvantaged (13 CFR 127.203(c)(3)(i)). This threshold was implemented in 2020 (85 FR 27650 (May 11, 2020)). Inflation, as measured by change in the GDP price index, since then has increased 11.86 percent. Adjusting $350,000 with that amount translates to $400,000 (rounded). These results are shown in Table 4, below.

Total Assets:
A woman will generally not be considered economically disadvantaged if the fair market value of all her assets (including her primary residence and the value of the business concern) exceeds $6,000,000 (13 CFR 127.203(c)(4)). This threshold was implemented in 2020 (85 FR 27650 (May 11, 2020)). Inflation, as measured by change in the GDP price index, since then has increased 11.86 percent. Adjusting $6,000,000 with that amount translates to $6,500,000 (rounded). These results are shown in Table 4.

Dollar Limits for Total 8(a) Contracts

8(a) BD participants (other than one owned by an Indian Tribe, ANC, NHO, or CDC) may not receive sole source 8(a) contract awards where the participant has received a combined total of competitive and sole source 8(a) contracts in excess of $100,000,000 during its participation in the 8(a) BD program (13 CFR 124.519). This threshold was implemented in 1998 (63 FR 35739 (June 30, 1998)). This has never been adjusted for inflation. Inflation, as measured by change in the GDP price index, since then has increased 68.33 percent (see table below). Adjusting $100,000,000 with that amount translated to $168,500,000 (rounded). These results are provided in Table 4, below.

Table 4—Inflation Adjustments of Certain Procurement Thresholds

Threshold name and value
(CFR citation)

Name
Value

Federal

Register

citation
(date)

Base period and
GDP price index

Base period
GDP price index

End period and
GDP price index

End period
GDP price index

Inflation
(%)

Adjusted threshold
(not rounded)

Adjusted threshold

(rounded)
1

8(a) Business Development Economic Disadvantage Thresholds:

Net worth (13 CFR 124.104(c)(2))
$750,000
85 FR 27650 (May 11, 2020)
Second quarter of 2020
112.97
Second quarter of 2022
126.367
11.86
$838,942
$850,000

Income (AGI) (13 CFR 124.104(c)(3))
350,000
85 FR 27650 (May 11, 2020)
Second quarter of 2020
112.97
Second quarter of 2022
126.367
11.86
391,506
400,000

Total assets (13 CFR 124.104(c)(4))
6,000,000
85 FR 27650 (May 11, 2020)
Second quarter of 2020
112.97
Second quarter of 2022
126.367
11.86
6,711,534
6,500,000

EDWOSB Thresholds:

Net worth (13 (CFR 127.203(b)(1))
750,000
85 FR 27650 (May 11, 2020)
Second quarter of 2020
112.97
Second quarter of 2022
126.367
11.86
838,942
850,000

Income (13 (CFR 127.203(c)(3) (i))
350,000
85 FR 27650 (May 11, 2020)
Second quarter of 2020
112.97
Second quarter of 2022
126.367
11.86
391,506
400,000

Total assets (13 CFR 127.203(c)(4))
6,000,000
85 FR 27650 (May 11, 2020)
Second quarter of 2020
112.97
Second quarter of 2022
126.367
11.86
6,711,534
6,500,000

Dollar Limits for Sole Source 8(a) (13 CFR 124.519)
100,000,000
63 FR 35739 (Jun. 30, 1998)
Second Quarter 1998
75.07
Second quarter of 2022
126.367
68.33
168,332,223
168,500,000

1
If value <1,000,000, then it is rounded to the nearest 50,000.

If value >=1,000,000, then it is rounded to the nearest 500,000.

III. Summary and Discussion of Public Comments on the July 18, 2019, IFR

As discussed above, in this rule, SBA is finalizing the changes to size standards contained in the July 2019 IFR. As such, SBA's adoption of the changes contained in the July 2019 IFR do not supersede the changes recently adopted by SBA as part of the second five-year review of size standards under the Jobs Act, nor do they supersede the adoption of size standards contained in this IFR which adjust SBA's monetary-based size standards for inflation that has occurred since the issuance of the July 2019 IFR. The instant rulemaking comprises a concurrent interim final rule further adjusting its current monetary-based size standards by 13.65 percent for additional inflation that has occurred since issuing the July 2019 IFR.

This final rulemaking finalizes, without change, SBA's July 2019 IFR that adjusted monetary-based industry size standards for inflation that occurred since 2014. The July 2019 IFR requested comments from the public on SBA's methodology of using the GDP price index for adjusting size standards and suggestions for alternative measures of inflation, on whether SBA should adjust employee-based size standards for labor productivity growth and technical changes similar to adjusting monetary-based size standards for inflation, and on changes to program-specific size standards. Below is a discussion of those comments and SBA's responses.

SBA received 11 comments on the July 2019 IFR, of which seven supported SBA's inflation-adjusted changes to size standards, two opposed the changes, and two discussed issues outside the scope of the IFR or did not state a clear position. All comments are available at the Federal Rulemaking Portal,
www.regulations.gov,
and are summarized and discussed by topic below.

Comment on the Effective Date of the July 2019 IFR

One commenter argued that the August 19, 2019, effective date adopted in the July 2019 IFR, which would fall in the middle of the fourth quarter of fiscal year 2019, would negatively impact procurement actions and recommended postponing the effective date until October 1, 2019, to minimize the disruptions. The commenter added that the procurement actions about to be issued based on market research conducted under the old size standards will also be impacted. Finally, the commenter contended that contractors would overwhelm the System for Award Management (SAM) system as they attempt to update their status in order to bid on previously unavailable actions, which will degrade the ability of the contracting officers to review the small business status of bidders in SAM before making an award.

SBA Response

SBA disagrees with the commenter that the effective date of the IFR will negatively impact procurement actions. SBA believes that the effective date for the IFR, which is 30 days from the date of publication in the
Federal Register
,
provides businesses and contracting professionals adequate time to adjust to the changes contained in the rule without causing significant disruptions to the procurement process. SBA has a long history of effectuating size standards on dates other than the beginning of a new fiscal year with few comments opposing the effective dates

proposed by SBA. This history includes numerous inflation adjustments to size standards as far back as February 1984 where the effective dates for the adopted changes do not fall on the start of a new fiscal year (49 FR 5025 (February 9, 1984)).
3

Typically, as is the case with the July 2019 IFR, SBA's changes to size standards become effective 30 days after publication of the corresponding final or interim final rule.

3
See also SBA's Interim Final Rule: Small Business Size Standards; Inflation Adjustment to Monetary Based Size Standards ((79 FR 33647 (June 12, 2014)) (SBA Final Rule (81 FR 3949 (January 25, 2016))); SBA Final Rule: Small Business Size Standards; Inflation Adjustment to Size Standards (73 FR 41237 (July 18, 2008)); SBA Interim Final Rule: Small Business Size Standards; Inflation Adjustment to Size Standards; Business Loan Program; Disaster Assistance Loan Program (70 FR 72577 (December 6, 2005)); SBA Final Rule: Small Business Size Standards; Inflation Adjustment to Size Standards (67 FR 65285 (October 24, 2002)); SBA Interim Final Rule: Small Business Size Standards; Inflation Adjustment to Size Standards (67 FR 3041 (January 23, 2002)); SBA Final Rule: Small Business Size Standards; Inflation Adjustment to Size Standards (59 FR 616513 (April 7, 1994))

Moreover, the procedures for incorporating SBA's changes to size standards into ongoing procurement actions are codified under small business size regulations and are generally well-understood by contracting officers. When contracting officers plan their procurements, they explore the possibility of setting aside their solicitations for small business programs based upon the number of small businesses, at that time, able to submit an acceptable proposal or bid. However, in accordance with 48 CFR 19.102(c), it is the contracting officer's decision whether to amend a solicitation to incorporate the new size standards if SBA amends the size standard and it becomes effective before the due date for receipt of initial offers. In the nearly three years since SBA published the interim final rule with the August 2019 effective date, SBA has not received comments that the timing of the size standards changes has caused significant disruptions to contracting activity or a substantial increase in the number of firms accessing SAM to update their size status, thereby curtailing the ability of contracting officers to use SAM. Thus, SBA believes that its August 19, 2019, effective date is appropriate and therefore, SBA is not adopting the changes suggested by the commenter.

Comments on the Impacts of Increased Labor Costs

Two commenters petitioned SBA to give more consideration to the impact of increased labor costs when determining the level of inflation for a given industry, either by using a different measure of inflation which better reflects increases to labor costs or by reviewing factors other than inflation that may capture the impact of increased labor costs more directly. One commenter, expressing overall support for the rule, believed that the majority of firms serving the Federal Government would welcome the adjustment of size standards to reflect the impacts of inflation but questioned whether the inflation measure applied to the rule accurately reflects the day-to-day realities of business conditions. The commenter recommended either using a different inflation measure or blending many existing measures to come up with an inflation factor which accurately reflects the actual changes in the labor costs, which according to the commenter, have increased by 12 percent to 15 percent over the last five years. Another commenter maintained that SBA should consider the availability of personnel with top secret clearances in certain NAICS codes that provide services to the Federal Government that require high-level clearances for administrative, professional and management personnel. The commenter added that salaries and benefits of these personnel are increasing at a rate much greater than inflation and this factor should be considered in addition to inflation when evaluating size standards for those NAICS codes.

SBA Response

SBA establishes small business size standards to determine eligibility of businesses for a wide variety of SBA's and other Federal programs. The majority of businesses participating in those programs are engaged in multiple industries producing a wide range of goods and services. Therefore, it is important that SBA use a broad measure of inflation to adjust its size standards. SBA's preferred measure of inflation has consistently been the chain-type price index for the U.S. Gross Domestic Product (GDP price index), published by the Bureau of Economic Analysis (BEA) within the U.S. Department of Commerce on a quarterly basis as part of its National Income and Product Accounts (NIPA).

In the July 2019 IFR as well as the 2014 IFR (79 FR 33647 (June 12, 2014)), besides the GDP price index, SBA reviewed several alternative inflation measures published by the Federal Government (including the consumer price index, the personal consumption expenditures price index, the producer price index, and the employment cost index) for their appropriateness to use for adjusting SBA's size standards. Among all these indexes, SBA determined that the GDP price index is the most comprehensive measure to capture movements in the general price level in the economy and consequently the most appropriate measure of inflation for adjusting SBA's size standards. Thus, as in the previous inflation adjustments, SBA decided to use the GDP price index to adjust monetary-based size standards for the July 2019 inflation adjustment.

Comments on SBA's Chosen Measure of Inflation

One commenter maintained that inflation adjustment should be considered if the results of the calculations result in revenue thresholds that show trends in the industry prices after removing the effect of general inflation. The commenter stated that GDP price index is a proven measure of inflation, but SBA should continue to review whether this is the correct measure to use in today's economy, possibly even more frequently than five-year intervals. The commenter noted that SBA should always verify results to ensure that there are no biases or improper use of algorithms in determining inflation adjustment and that SBA should approve the proposal as it is beneficial to small business entities.

SBA Response

SBA agrees with the commenter that it is necessary for SBA to continually assess whether its selected measure of inflation is the most appropriate measure for adjusting its size standards. As described in SBA's response to the previous comment, SBA establishes small business size standards to determine eligibility of businesses for a wide variety of SBA's and other Federal programs where the majority of businesses participating in those programs are engaged in multiple industries producing a wide range of goods and services. Therefore, SBA uses the GDP price index to adjust its size standards because it is an appropriately broad measure of inflation that reflects the characteristics of the firms to which it pertains.

Moreover, SBA agrees with the commenter that SBA should continually assess the timing of its adjustments to size standards and consider adjustments even more frequently than five-year intervals based on the prevailing economic situation conditions. Accordingly, SBA is issuing this IFR to adjust monetary-based size standards for

inflation that has occurred since the July 2019 IFR.

As stated above, in the July 2019 IFR as well as the 2014 IFR (79 FR 33647 (June 12, 2014)), besides the GDP price index, SBA reviewed several alternative inflation measures published by the Federal Government (including the consumer price index, the personal consumption expenditures price index, the producer price index, and the employment cost index) for their appropriateness to use for adjusting SBA's size standards. Among all these indexes, SBA determined that the GDP price index is the most comprehensive measure to capture movements in the general price level in the economy and consequently the most appropriate measure of inflation for adjusting SBA's size standards. Thus, as in the previous inflation adjustments, SBA decided to use the GDP price index to adjust monetary-based size standards for the August 2019 inflation adjustment.

Comments on the Size Standard for NAICS 562910 (Remediation Services)

SBA received one comment from a Service-Disabled Veteran Owned Small Business (SDVOSB) concern, operating under NAICS 562910 (Remediation Services). The commenter petitioned SBA to make certain changes to footnote 14 to the SBA's Table of Size Standards, applicable to the Environmental Remediation Services (ERS) exception to NAICS 562910 (Remediation Services), to make it easier for small firms to compete under the ERS exception's 750-employee size standard. The commenter expressed that, in an effort to work with larger businesses, contracting officers may be overusing the ERS exception, classifying procurements under the 750-employee size standard applicable to the exception rather than the $22 million size standard applicable to the general NAICS 562910, even when it may be more appropriate for contracting officers to classify a given solicitation under the general NAICS. Thus, the commenter petitioned SBA to revise footnote 14 by making the requirements more restrictive so that contracting officers have less discretion to forgo classifying solicitations under the general NAICS 562910 in favor of using the exception.

SBA Response

SBA's regulations require contracting officers to designate the proper NAICS code for a solicitation based on the principal purpose of the product or service being acquired (13 CFR 121.402(b)). SBA's regulations at 13 CFR 121.1101 allow affected parties to appeal with the SBA's Office of Hearings and Appeals (OHA) a NAICS code designation made by a contracting officer. SBA encourages impacted firms to follow the procedures outlined in SBA's regulations when they believe that a contracting officer has categorized a solicitation under an improper NAICS code. Moreover, in this final rule, SBA is finalizing the changes to the July 2019 IFR which adjusted SBA's monetary-based size standards for inflation. Thus, SBA considers changes to industry definitions as outside the scope of this rule.

Comments on the Size Standard for NAICS 541330 (Engineering Services)

SBA received a comment from an engineering firm supporting the SBA's adjustment of its size standards for inflation, specifically an increase in the size standard for Engineering Services to $16.5 million. The commenter maintained that the transition from “small” to “other than small” status requires significant investments in IT processes and equipment, and business capabilities to be able to compete with much larger firms. The commenter added that adjusting size standards for inflation allows firms necessary time to implement such processes and build capabilities before exceeding the size standard. SBA received another comment that favored the inflationary adjustments to the size standards but expressed concerns that the general inflation measure that SBA applied does not sufficiently capture the recent business trends and Government buying patterns in NAICS Industry 541330 (Engineering Services) and NAICS Industry Group 5415 (Computer Systems Design and Related Services). The commenter maintained that the growing complexity of services in NAICS 5415, recent bundling of these services by the Federal Government, and use of these NAICS codes for new cybersecurity services are not adequately captured by the adjustment for inflation alone. The commenter recommended conducting a full review of IT/computer/cybersecurity industry and contracts that have been awarded under this industry to ensure that size standards are appropriate. The commenter believed that more appropriate size standards for industries under NAICS 5415 should be in the $50 million range. Another area of concern the commenter expressed related to increasing complexity of engineering services provided to military under general NAICS 541330 and each of the three exceptions and to the number of small businesses needed to maintain the healthy defense industrial base. The commenter recommended conducting a thorough review of NAICS 541330 and how this NAICS code is being used by the Government to purchase engineering services to establish a more appropriate size standard, which could be two or three times more than the current size standard.

SBA Response

SBA agrees with the comment that the adjustments to size standards for inflation will help small businesses by expanding access to SBA programs, thereby allowing small firms within Engineering Services to continue building capabilities and experience before exceeding the size standard. SBA believes that adjusting size standards for inflation is an important tool in ensuring that small businesses can successfully compete for Federal contracting opportunities.

SBA does not agree with comments suggesting that SBA should choose different inflation measures for select industries or use industry-specific methodologies to evaluate size standards for changes due to inflation. As explained previously in this final rule, SBA establishes small business size standards to determine eligibility of businesses for a wide variety of SBA's and other Federal programs. The majority of businesses participating in those programs are engaged in multiple industries producing a wide range of goods and services. Therefore, it is important that SBA use a broad, comprehensive measure of inflation to adjust its size standards.

Moreover, SBA does not agree with comments that SBA should conduct a full review of NAICS 541330, or the IT/computer/cybersecurity industry using industry specific factors as part of this regulatory action. In this final rule, SBA is finalizing the changes to the July 2019 IFR, which adjusted SBA's monetary-based size standards for inflation. Thus, SBA considers the evaluation of size standards for specific industries based on industry-specific factors other than inflation as outside the scope of this rule. SBA considers industry-specific characteristics and other non-inflation related factors as part of review of size standards under the Jobs Act.

As discussed earlier in this rule, SBA recently published a series of five final rules, after an appropriate notice and comment period, evaluating all monetary-based size standards (receipts-based and assets-based) and employee-based size standards under Wholesale Trade and Retail Trade as part of SBA's second five-year size standards review

as mandated by the Jobs Act.
4

Revisions to monetary-based size standards in those five final rules were in addition to inflationary adjustments to size standards adopted in the July 2019 IFR.

4
See Small Business Size Standards: Agriculture, Forestry, Fishing and Hunting; Mining, Quarrying, and Oil and Gas Extraction; Utilities; Construction (87 FR 18607; March 31, 2022), Small Business Size Standards: Transportation and Warehousing; Information; Finance and Insurance; Real Estate and Rental and Leasing (87 FR 18627; March 31, 2022), Small Business Size Standards: Professional, Scientific and Technical Services; Management of Companies and Enterprises; Administrative and Support and Waste Management and Remediation Services (87 FR 18665; March 31, 2022), Small Business Size Standards: Education Services; Health Care and Social Assistance; Arts, Entertainment and Recreation; Accommodation and Food Services; Other Services (87 FR 18646; March 31, 2022), and Small Business Size Standards: Wholesale Trade and Retail Trade (87 FR 35869; June 14, 2022).

SBA believes that its five-year comprehensive review of size standards under the Jobs Act is the most appropriate regulatory venue to evaluate and address industry specific economic characteristics and recent Federal contracting trends that may support a size standard different from SBA's current size standard. As part of its review of size standards, SBA must ensure that small business definitions vary from industry to industry to reflect industry differences as required by the Small Business Act (15 U.S.C. 632(a)) (Act). To that end, as part of the comprehensive review of size standards, SBA evaluates characteristics of industry structure at the six-digit NAICS level, such as average firm size, startup costs and entry barriers, industry concentration, and distribution of firms by business size. SBA also evaluates Federal contracting trends (
i.e.,
small business share of Federal contract dollars relative to small business share of total industry's receipts) for industries with significant contracting activities (
i.e.,
industries averaging $20 million or more in Federal contracts annually). Based on its analysis of the above industry and Federal contracting factors, and after considering all comments submitted to SBA during the proposed rule stage, on March 31, 2022, SBA adopted an increase to the size standard for NAICS 541330 from $16.5 million to $22.5 million (87 FR 18665 (March 31, 2022)). Similarly, using the same methodology, as part of the second five-year comprehensive review of size standards, SBA evaluated the size standards for all industries with a receipt-based size standard in the IT/computer/cybersecurity industries. Thus, while SBA is not including a comprehensive review of industry factors in this final rule, SBA believes that it has satisfied the petitions of commenters to consider industry-specific factors for NAICS 541330 and the IT/computer/cybersecurity industries (
i.e.,
industries within NAICS Industry Group 5415) as part of the second five-year review of size standards under the Jobs Act.

Other Comments

Other comments to SBA's July 2019 IFR mostly expressed broad support for SBA's changes to size standards. One comment supporting SBA's action stated that adjusting size standards for inflation will make the size standards more accurate and beneficial to all stakeholders. The commenter added that adjusting size standards for inflation will enable SBA to assist all small businesses by allowing them to qualify for SBA's loans and other benefits which will spur economic growth, increase tax revenues, and promote job growth. Another commenter supported the SBA's decision to adjust monetary-based size standards for inflation because it will help small businesses continue to receive government contracting assistance. The commenter added that this is particularly helpful for businesses in industries that require high levels of capital investments as it will provide small businesses with more time to pursue and win Federal opportunities to support such investments. The commenter stated that this will also increase the availability of qualified small businesses for the Federal agencies to choose from to meet their small business contracting needs. One commenter supported the regulation but expressed reservations about whether the regulatory change will be implemented equally across all states or localities. The commenter also thought that allowing more businesses to qualify as small is a good idea, but argued that the intent is more taxation rather than helping small businesses. SBA also received a comment that opposed the rule on the grounds that it is capricious and based on opinion. The commenter petitioned SBA to not implement the rule, but did not provide sufficient reasoning or evidence for why SBA should rescind the changes contained in the IFR.

SBA Response

SBA agrees with commenters supporting the rule that there are a myriad of benefits of adopting the changes to size standards adopted in the July 2019 IFR. The most significant benefits were described in the regulatory impact analysis section of the July 2019 IFR. The primary benefits include: (1) Some businesses that are above the current size standards may gain small business status under the higher, inflation-adjusted size standards, thereby enabling them to participate in Federal small business assistance programs; (2) Growing small businesses that are close to exceeding the current size standards will be able to retain their small business status under the higher size standards, thereby enabling them to continue their participation in the programs; and (3) Federal agencies will have a larger pool of small businesses from which to draw for their small business procurement programs.

SBA estimated that the changes adopted in the July 2019 IFR enabled approximately 89,730 firms in industries and subindustries with receipts-based size standards and about 160 firms in industries with assets-based size standards, above SBA's size standards at the time, to gain small business status and become eligible for SBA programs, resulting in between $700 million and $750 million in additional small business Federal contract dollars. SBA disagrees with the comment suggesting that the primary purpose of SBA's inflation adjustment to size standards is to expand the Federal Government's tax base. SBA also disagrees with the notion that SBA's inflation adjustments to size standards are arbitrary and capricious. As explained in the July 2019 IFR, SBA is required to assess the impact of inflation on its monetary-based size standards at least once every five years (
see
SBA Interim Final Rule: Small Business Size Standards: Inflation Adjustment to Monetary Based Size Standards (67 FR 3041; January 23, 2002) and 13 CFR 121.102(c)). Although the provision does not mandate that SBA actually adjust size standards for inflation every five years, it does provide assurances to the public that the Agency is monitoring inflation to determine whether or not to adjust size standards within a reasonable period of time since its last inflation adjustment. Thus, SBA believes that the changes to size standards adopted in the July 2019 IFR are reasonable and satisfy the requirements of 13 CFR 121.102(c).

Conclusion

With due consideration of all public comments as discussed above, SBA is adopting the increases in all industry-specific monetary size standards for inflation, as published in the July 2019 IFR. SBA is also adopting the increases in two program specific size standards, namely the Sales of Government Property from $62.5 million to $67.5

million, and Stockpile Purchases from $7.5 million to $8 million, which are being further increased through the present interim final rule to $76.5 million and $9 million, respectively. SBA is also adopting the increase to the size standard found in Footnote 9 to 13 CFR 121.201 (Leasing of Building Space to the Federal Government by Owners) from $38.5 million to $41.5 million, which is being further increased to $47 million in this interim final rule. This size standard exception applies to all four industries in NAICS Industry Group 5311, Lessors of Real Estate.

Accordingly, SBA is issuing this final rule to adopt, without change, the interim final rule published on July 18, 2019 (84 FR 34261). SBA's adoption of the changes contained in the 2019 IFR are procedural and do not supersede the changes recently adopted by SBA as part of the second five-year review of size standards under the Jobs Act, nor do they supersede the adoption of size standards contained in this IFR which adjust SBA's monetary-based size standards for inflation that has occurred since the issuance of the July 2019 IFR.

IV. Justification for Updating Size Standards for Inflation as an Interim Final Rule

In general, to revise or update size standards, SBA publishes a proposed rule for public comment before issuing a final rule, in accordance with the Administrative Procedure Act (APA), 5 U.S.C. 553, and SBA regulations, 13 CFR 101.108. The APA provides an exception to this standard rulemaking process, however, in situations where an agency finds good cause to adopt a rule without prior public participation. (
See
5 U.S.C. 553(b)(3)(B)). The good cause requirement is satisfied when prior public participation is impracticable, unnecessary, or contrary to the public interest. Under those conditions, an agency may publish an interim final rule without first soliciting public comment. In applying the good cause exception to the standard rulemaking process, Congress recognized that special circumstances might arise justifying issuance of a rule without prior public participation.

As stated above, the last time SBA made inflation adjustments to size standards was 2019. Since then, inflation, as measured by the GDP price index, has increased 13.65 percent,
5

which has caused size standards to decrease in real terms thereby causing businesses to lose their small business status. Inflation is running at the highest level since the early 1980s. For example, according to the U.S. Bureau of Labor Statistics, the Consumer Price Index for All Urban Consumers (CPI-U), before seasonal adjustment, increased 8.3 percent over the last 12 months ending in August 2022.
6

Similarly, the Producer Price Index (PPI) for final demand, on a seasonally unadjusted basis, increased 8.7 percent for the 12 months ending in August 2022.
7

According to the GDP second estimate from the Bureau of Economic Analysis, the GDP price index increased 7.5 percent in the second quarter of 2022 from the second quarter of 2021.
8

Similarly, the price index for personal consumption expenditures (PCE) increased 6.5 percent in the second quarter of 2022 from the second quarter of 2021.

5
For comparison, when SBA implemented the July 2019 IFR inflation adjustment, the GDP price index had increased 8.37 percent over the previous five-year period.

6

https://www.bls.gov/news.release/cpi.nr0.htm,
September 13, 2022.

7

https://www.bls.gov/news.release/ppi.nr0.htm,
September 14, 2022.

8

https://www.bea.gov/news/2022/gross-domestic-product-second-estimate-and-corporate-profits-preliminary-second-quarter,
August 25, 2022.

Therefore, this rule is necessary to make those businesses eligible for Federal assistance immediately. A number of businesses may have lost small business eligibility for Federal assistance under SBA's monetary-based size standards simply as a result of the inflation that has occurred since the previous inflation adjustment in 2019. Any delay in the adoption of inflation-adjusted size standards could cause significant harm to those businesses and others that are about to exceed current size standards simply due to inflation-driven revenue growth. Immediate implementation of this rule would enable more businesses to qualify under SBA's monetary-based size standards, which would enable them to apply for Federal small business assistance and thereby create jobs.

The standard notice and comment rulemaking could delay the implementation of this rule by at least 8 months to 12 months. Such a delay would be contrary to the public interest as it would delay the eligibility of those businesses for Federal small business assistance, perhaps forcing some of them to cease operations before a final rule could be promulgated under the standard rulemaking process. Furthermore, the inflation adjustment will become outdated by the time the final rule is published under notice and comment rulemaking.

For the above reasons, SBA finds that good cause exists to publish this rule as an interim final rule. SBA's rationale for preparing this action as an interim final rule and giving it immediate effect is consistent with the Agency's statutory obligation to protect the interests of small businesses, thereby enabling them to maintain competitiveness and strengthen the overall economy. Small Business Act, 15 U.S.C. 631(a). SBA had also implemented inflation adjustments to size standards through an interim final rule in 2002 (67 FR 3041), 2005 (70 FR 72577), and 2014 (79 FR 33647) without any controversies.

By publishing these adjustments as interim final, SBA is not excluding public participation in the rulemaking process. SBA is soliciting comments from interested parties on the interim final provisions of this rulemaking and on a number of issues, including SBA's methodology for inflation adjustment and alternative measures of inflation. SBA will evaluate all comments and revise, if necessary, this rule, and publish a final rule at a later date.

Request for Comments

SBA seeks comments on this rule, specifically on the following issues:

1. SBA welcomes comments from interested parties on SBA's size standards methodology for inflation adjustment to its size standards. Specifically, SBA seeks comment on whether the GDP price index is an appropriate measure of inflation for adjusting size standards. The Agency invites suggestions, along with supporting data and analysis, if a different measure of inflation would be more appropriate.

2. SBA also invites comments on whether it should adjust employee-based industry size standards for labor productivity growth and technological advancements, similar to adjusting monetary-based industry size standards for inflation.

3. SBA also invites comments on any other aspects of this rulemaking, including the changes to program-based and assets-based size standards, and economic disadvantage thresholds in its regulations that apply to 8(a) BD and EDWOSB programs.

V. Compliance With Executive Order 12866, the Congressional Review Act (5 U.S.C. 801-808), the Regulatory Flexibility Act (5 U.S.C. 601-612), Executive Orders 13563, 12988, and 13132, and the Paperwork Reduction Act (44 U.S.C., Ch. 35)

Executive Order 12866

The Office of Management and Budget (OMB) has determined that the interim final provisions of this rule are not a “significant regulatory action” for

purposes of Executive Order 12866. OMB previously determined that the July 2019 IFR was also not a “significant regulatory action” for purposes of Executive Order 12866, and maintains that the final rule provisions are also “not significant”. However, in order to help explain the need for this rule and its potential benefits and costs, SBA has provided below a Cost Benefit Analysis of this rule.

Cost Benefit Analysis

1. What is the need for the regulatory action?

SBA's statutory mission is to aid and assist small businesses through a variety of financial, procurement, business development, and advocacy programs. To assist the intended beneficiaries of these programs effectively, SBA must establish distinct definitions of which businesses are deemed small businesses. The Small Business Act (15 U.S.C. 632(a)) (Act) delegates to the SBA Administrator the responsibility for establishing small business definitions. The Act also requires that small business definitions vary from industry to industry to reflect industry differences. SBA is required to assess the impact of inflation on its monetary-based size standards at least once every five years (67 FR 3041 (January 23, 2002) and 13 CFR 121.102(c)). Inflation, as measured by the change in GDP price index, has increased 13.65 percent from the previous inflation adjustment of size standards in 2019.
9

Inflation has caused monetary based size standards to decrease in real terms, thereby forcing businesses to lose small business status and eligibility for Federal assistance.

9
As stated in the SBA's Inflation Adjustment Methodology section above, the GDP price index for the base period (
i.e.,
4th quarter of 2018) was 111.191 and the GDP price index for the end period (
i.e.,
2nd quarter of 2022) was 126.367. Accordingly, inflation increased 131.65 percent from the fourth quarter of 2018 to the first quarter of 2022 (((126.367123.705 ÷ 111.191)−1) × 100 percent = 13.65 percent).

In addition, SBA intends to adjust economic disadvantage thresholds in its regulations that are otherwise not adjusted for inflation under FAR 1.109. These thresholds primarily are those used in the 8(a) Business Development and economically disadvantaged women-owned small business (EDWOSB) programs to determine economic disadvantage. This action will permit small businesses to retain eligibility as economically disadvantaged and eligible for the 8(a) BD and EDWOSB programs, despite an increase in inflation.

2. What are the potential benefits and costs of this regulatory action?

The size standards adopted by SBA in this rulemaking would enable businesses that have exceeded industry size standards or their economic disadvantage thresholds simply due to inflation-driven revenue growth to regain or maintain eligibility for Federal small business assistance programs. The changes would also help businesses about to exceed their size standards or to exceed their economic disadvantage thresholds to retain small business eligibility for Federal programs for a longer period. These programs include SBA's business loan programs, economic injury disaster loan (EIDL) program, and Federal procurement programs intended for small businesses. Federal procurement programs provide targeted opportunities for small businesses under SBA's contracting and business development programs, such as 8(a) Business Development (8(a) BD) program, small businesses located in Historically Underutilized Business Zones (HUBZone) program, women-owned small businesses (WOSB) program, economically disadvantaged women-owned small businesses (EDWOSB) program, and service-disabled veteran-owned small businesses (SDVOSB) program. Federal agencies may also use SBA's size standards for a variety of other regulatory and program purposes. These programs assist small businesses to become more knowledgeable, stable, and competitive.

The Baseline

For purposes of this regulatory action, the baseline represents maintaining the “status quo,”
i.e.,
making no changes to the current size standards. Using the number of small businesses and levels of small business benefits (such as set-aside contracts, SBA's loans, disaster assistance, etc.) they receive under the current size standards as a baseline, one can examine the potential benefits, costs, and transfer impacts of changes to size standards on small businesses and on the overall economy.

Based on the 2017 Economic Census data and the 2022 NAICS adopted by SBA, of a total of 7,460,728 firms in the 505 impacted industries with receipts-based size standards, 98.1 percent are considered small under the current, recently adopted receipts-based size standards based on the second five-year review of size standards under the Jobs Act and the adoption of the 2022 NAICS structure.

Similarly, based on the data from Federal Procurement Data System—Next Generation (FPDS-NG) for fiscal years 2018-2020, 76,323 unique firms in 441 industries received at least one Federal contract during that period, of which 81.9 percent were found to be small under the current and recently adopted receipts-based size standards based on the second five-year review of size standards under the Jobs Act.
10

Of about $231.4 billion in total average annual contract dollars awarded to businesses in the impacted industries with receipt-based size standards during that period, 34.3 percent went to small businesses.
11

Of about $79.4 billion in total small business contract dollars awarded in those industries during that period, 72.9 percent were awarded through various set-aside programs and 27.1 percent were awarded through non-set aside contracts. Table 5, Baseline of Industries with Receipts-Based Size Standards Adjusted for Inflation, provides these baseline results.

10
This analysis excludes 64 industries with receipts-based size standards under NAICS Sector 44-45 (Retail Trade) that does not apply for Federal contracting.

11
The analysis includes only firms that can be small under the SBA criteria.

Table 5—Baseline of Industries With Receipts-Based Size Standards Adjusted for Inflation

Impact variable
Value

Number of industries impacted by adjustment to receipts-based size standards
505

Total firms in impacted industries (2017 Economic Census)
7,460,728

Total small firms in impacted industries under current receipts-based size standards (2017 Economic Census)
7,319,914

Small firms as % of total firms (2017 Economic Census)
98.1

Total contract dollars ($ million) (FPDS-NG—fiscal years 2018-2020) to impacted industries
$231,427

Total small business contract dollars under current size standards ($ million) (FPDS-NG—fiscal years 2018-2020)
$79,380

Small business dollars as % of total dollars (FPDS-NG fiscal years 2018-2020)
34.3

Total number of unique firms getting contracts in impacted industries (FPDS-NG fiscal years 2018-2020))
76,157

Total number of unique small firms getting small business contracts (FPDS-NG fiscal years 2018-2020))
62,539

Small business firms as % of total firms (FPDS-NG fiscal years 2018-2020)
81.9

Annual no. of 7(a) and CDC/504 loans (fiscal years 2018-2020)
50,092

Amount of 7(a) and CDC/504 loans ($ million) (fiscal years 2018-2020)
$23,909

Annual no. of EIDL loans (fiscal years 2018-2020)
1

4,550

Amount of EIDL loans ($ million) (fiscal years 2018-2020)
1

$166

1
Excludes COVID-19 related EIDL loans due to their temporary nature. Effective January 1, 2022, SBA stopped accepting applications for new COVID EIDL loans or advances.

Based on the SBA's internal data on its loan programs for fiscal years 2018-2020, small businesses in those industries received, on an annual basis, a total of 50,092 7(a) and Certified Development Company (CDC)/504 loans in that period, totaling about $23.9 billion, of which 82.7 percent was issued through the 7(a) loan guarantee program and 17.3 percent was issued through the CDC/504 program. During fiscal years 2018-2020, small businesses in those industries also received 4,550 loans through the SBA's EIDL program, totaling about $166 million on an annual basis.
12

12
The analysis of the disaster loan data excludes physical disaster loans that are available to anyone regardless of size, disaster loans issued to nonprofit entities, and EIDLs issued under the COVID-19 relief program. Effective January 1, 2022, SBA stopped accepting applications for new COVID EIDL loans or advances. Thus, the disaster loan analysis presented here pertains to the regular EIDL loans only. SBA estimates impacts of size standards changes on EIDL loans by calculating the ratio of businesses getting EIDL loans to total small businesses (based on the 2017 Economic Census data) and multiplying it by the number of impacted small firms. 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. 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.

Increases to Size Standards

As stated above, SBA's additional inflation adjustment to receipts-based size standards have resulted in an increase to the size standards for 505 industries and subindustries. Below are descriptions of the benefits, costs, and transfer impacts of the adopted size standards contained in this IFR.

Benefits of Increases to Size Standards

The benefits of adopting the inflation-adjusted size standards will accrue to three groups in the following ways: (1) Some businesses that are currently above their current size standards may gain small business status, thereby becoming eligible to participate in Federal small business assistance programs, including SBA's 7(a) loan program, CDC/504 loan program, EIDL program, Surety Bond Guarantee program, and Federal procurement and business development programs intended for small businesses; (2) Growing small businesses that are close to exceeding the current size standards for their receipts-based industries may retain their small business status for a longer period, and can continue participating in the above programs; and (3) Federal Government agencies will have a larger pool of small businesses from which to draw to fulfill their small business procurement requirements.

The most significant benefit to businesses from increases to size standards is gaining or extending eligibility for Federal small business assistance programs. As stated above, these include SBA's 7(a) loan program, CDC/504 loan program, EIDL program, Surety Bond Guarantee program, and Federal procurement business development programs intended for small businesses. Federal procurement and business development programs provide targeted, set-aside opportunities for small businesses. These include the 8(a) BD program, HUBZone program, the WOSB program, EDWOSB program, and SDVOSB program.

In industries with the receipts-based size standards, based on the 2017 Economic Census data, SBA estimates that 17,713 additional businesses would gain small business status under the inflation-adjusted size standards. That represents about 0.2 percent of the total number of small businesses in the affected industries under the current size standards. This would result in an increase to the small business share of total receipts in those 505 industries/subindustries from 29.0 percent to 30.0 percent. Table 6, Impacts of Receipts-Based Size Standards Adjusted for Inflation, provides impacts of increasing size standards for the 505 industries/subindustries with receipts-based size standards.

Table 6—Impacts of Receipts-Based Size Standards Adjusted for Inflation

Impact variable
Value

Number of industries with increases to receipts-based size standards
485

Total current small businesses in industries with increases to receipts-based size standards (2017 Economic Census)
73,19,914

Additional firms qualifying as small under inflation-adjusted receipts-based size standards (2017 Economic Census)
17,713

of additional firms qualifying as small relative to current small businesses in industries with increases to size standards (2017 Economic Census)
0.24

Number of current unique small firms getting small business contracts in industries with increases to size standards (FPDS-NG fiscal years 2018-2020)
1

62,539

Additional small business firms getting small business status (FPDS-NG fiscal years 2018-2020)
1

586

increase to small businesses relative to current unique small firms getting small business contracts in industries with increases to size standards (FPDS-NG fiscal years 2018-2020)
0.94

Total small business contract dollars under current standards in industries with increases to size standards ($ million) (FPDS-NG fiscal years 2018-2020)
$79,380

Estimated additional small business dollars available to newly-qualified small firms (using avg. dollars obligated to small businesses) ($ million) (FPDS-NG fiscal years 2018-2020)
2

$1,313

increase to small business dollars relative to total small business contract dollars under current standards in industries with increases to size standards
1.65

Estimated number of 7(a) and CDC/504 loans to newly-qualified small firms
7

Estimated 7(a) and CDC/504 loan amounts to newly-qualified small firms ($ million)
$4.08

increase to 7(a) and CDC/504 loan amount relative to the total amount of 7(a) and CDC/504 loans in industries with increases to size standards
0.02

Estimated number of EIDL loans to newly qualified small firms
3

1

Estimated EIDL loan amount to newly qualified small firms ($ million)
3

0.002

increase to EIDL loan amount relative to the total amount of disaster loans in industries with increases to size standards
3

0.001

1
Total impact represents total unique number of firms impacted to avoid double counting as some firms are participating in more than one industry.

2
Additional dollars are calculated multiplying average small business dollars obligated per DUNS times change in number of firms. Numbers of firms are calculated using the SBA current size standard, not the contracting officer's size designation.

3
Excludes COVID-19 related EIDL loans due to their temporary nature. Effective January 1, 2022, SBA stopped accepting applications for new COVID EIDL loans or advances.

As shown in Table 6, based on the FPDS-NG data for fiscal years 2018-2020, SBA estimates that 586 firms that are currently active in Federal contracting in those industries would gain small business status under the higher inflation-adjusted receipts-based size standards. Based on the same data, SBA estimates that those newly-qualified small businesses under the higher inflation-adjusted size standards could receive Federal small business contracts totaling about $1.3 billion annually. That represents a 1.65 percent increase to Federal small business dollars from the baseline. Additionally, due to the adjustment of assets-based size standards in four industries, SBA estimates that about 170 additional firms will gain small business status in those industries, increasing the small business share of total assets in those industries from 5.4 percent to 5.9 percent.

The added competition from more businesses qualifying as small can result in lower prices to certain Federal Government procurements set aside or reserved for small businesses, but SBA cannot quantify this impact precisely. Costs could also be higher when full and open contracts are awarded to HUBZone businesses that receive price evaluation preferences. However, with agencies likely setting aside more contracts for small businesses in response to the availability of a larger pool of small businesses under the higher size standards, HUBZone firms might receive more set-aside contracts and fewer full and open contracts, thereby resulting in some cost savings to agencies. SBA cannot estimate such costs savings as it is impossible to determine the number and value of unrestricted contracts to be otherwise awarded to HUBZone firms will be awarded as set-asides. However, such cost savings are likely to be relatively small as only a small fraction of full and open contracts are awarded to HUBZone businesses.

Under SBA's 7(a) and CDC/504 loan programs, with more businesses qualifying as small under the higher size standards, SBA will be able to guarantee more loans to small businesses. However, SBA expects the impact on loans to be minimal since applicants to SBA's financial assistance programs are typically much smaller than the industry size standard and most businesses that currently participate in the program would continue to remain eligible for assistance even after this rule is adopted. Moreover, SBA does not anticipate that the increases to size standards will have a significant impact on the distribution of firms receiving loans by size of firm. Since SBA's size standards changes primarily impact firms at the higher margin of size standards, SBA estimates the impact on its financial assistance programs by estimating the number of loans and the amount of loans to firms larger than ten percent below their size thresholds. SBA believes that expanding access to SBA's financial assistance programs will help all small businesses to adapt to changes in business environment, recover from disasters more quickly, and grow successfully, while having no impact on the ability of smaller small firms to access financial services from SBA.

Based on its internal data for fiscal years 2018-2020 and the amount of loans to firms larger than ten percent below their size thresholds, SBA estimates that about seven additional 7(a) and CDC/504 loans, totaling approximately $4.1 million, could be made to the newly-defined small businesses under the higher inflation-adjusted size standards. That represents a 0.02 percent increase to the loan amount compared to the baseline (see Table 6). The actual impact might be even smaller as the newly-qualified firms under the higher inflation-adjusted size standards could have qualified anyway under the tangible net worth and net income based alternative size standard that applies to the SBA's 7(a) and CDC/504 programs.

Newly-defined small businesses will also benefit from SBA's EIDL program, which, like SBA's 7(a) and CDC/504 loan program, typically provides loans to businesses that are much smaller than the industry size standard. Since this program is contingent on the occurrence and severity of a disaster, SBA cannot make a precise estimate of the future EIDL benefit. However, based on its internal disaster loan program data for fiscal years 2018-2020 and the amount of loans to firms greater than ten percent below their size thresholds, SBA estimates that, on an annual basis, one additional EIDL loan, totaling approximately $2,000 could be made to the newly-defined small businesses under the higher inflation-adjusted size standards.

Additionally, the newly-defined small businesses under the higher inflation-adjusted size standards would also benefit through reduced fees, less paperwork, and fewer compliance requirements that are available to small businesses through the Federal Government programs, but SBA has no data to quantify this impact.

Benefits of Increases to Disadvantage Thresholds, 8(a) Eligibility Thresholds, and Dollar Thresholds for 8(a) Sole Source Contracts for Inflation

The increases in the economic disadvantage (ED) eligibility thresholds through inflation adjustment support gaining eligibility of the new applicants which would otherwise be not approved and maintaining eligibility of the existing participants in the 8(a) BD and EDWOSB programs. The new applicants affected by inflation impacting the value of their net worth (NW), adjusted gross income (AGI) and total assets (TA) will be approved into these programs. The

changes would also help current SBA ED participants who are about to exceed their NW, AGI, or TA thresholds to retain ED eligibility for Federal programs for a longer period.

Internal data on applicants to the 8(a) BD program from fiscal years 2019 to 2021 shows that since the ED thresholds were increased for new applicants in mid-2020 (see Table 7, Increases in ED Thresholds Adopted on July 15, 2020), the number of approvals increased by 3.2 percent, and the number of denials for economic-disadvantage reasons decreased by 36.8 percent. Same data also shows that since 2019, the applicants' average NW increased by 50 percent, the average AGI by about 20 percent, and the average total assets by 40 percent. The inflation adjustment to the ED thresholds will permit to mitigate the impact of the current high inflation rate on the new applicants to the SBA ED programs, maintaining their eligibility opportunities. Also, the inflation adjustment of the ED thresholds will help to preserve the real value of the current thresholds, and the positive impact that the changes pursued by SBA since 2020 have had on these programs. In this sense, inflation adjustment of the ED thresholds complements the inflation adjustment of the monetary-based size standards proposed in this IFR.

Table 7—Increases ED Thresholds Adopted on July 15, 2020

ED thresholds

Previous
thresholds

Current
thresholds

Percentage change
(%)

Net worth (W)
$250,000
$750,000
200

Aggregated gross income (AGI)
250,000
350,000
40

Total assets (TA)
4,000,000
6,000,000
50

The number of 8(a) firms totaling more than $100 million in total cumulative dollar obligations (
i.e.,
total of sole source and competitive 8(a) awards) has been consistently increasing from less than ten firms during 2011-2012 to about 130-140 firms during 2020-2021. Of these 130-140 firms exceeding the $100 million threshold, about 87-90 firms totaled between $100 million and $168.5 million in cumulative contract awards and would become eligible for sole source 8(a) contracts again.

Costs of Increases to Size Standards and Economic Disadvantage and 8(a) Sole Source Thresholds

Aside from taking time to register in the System for Award Management (SAM) to be eligible to participate in Federal contracting and update the SAM profile annually, small businesses incur no direct costs to gain or retain their small business status under the inflation adjusted size standards. All businesses willing to do business with the Federal Government must register in SAM and update their SAM profiles annually, regardless of their size status. SBA believes that a vast majority of businesses that are willing to participate in Federal contracting are already registered in SAM and update their SAM profiles annually. It is important to point out that most business entities that are already registered in SAM will not be required to update their SAM profiles. However, it will be incumbent on registrants to review, and update as necessary, their profiles to ensure that they have the correct NAICS codes. SAM requires that registered companies review and update their profiles annually, and therefore, businesses will need to pay particular attention to the changes to determine if they might affect them. They will also have to verify, and update, if necessary, their Representations and Certifications in SAM. More importantly, this rule does not establish the new size standards for the very first time; rather it intends to modify the existing size standards by adjusting them for the inflation that has occurred since the last inflation adjustment in 2019.

To the extent that the newly-defined small firms under the higher inflation-adjusted size standards could become active in Federal procurement programs, this may entail some additional administrative costs to the Federal Government because of more businesses qualifying for Federal small business programs. For example, there will be more firms seeking SBA's loans, more firms eligible for enrollment in the SBA's Dynamic Small Business Search (DSBS) database or in
certify.sba.gov,
more firms seeking certifications as 8(a) BD or HUBZone firms, or qualifying for WOSB, EDWOSB, and SDVOSB status, and more firms applying for SBA's 8(a) BD mentor-protégé program. SBA expects the costs of additional applicants to the SBA programs as a result of changes to size standards in this final rule to be minimal because necessary administrative mechanisms for processing additional applications are already in place.

Among those newly-defined small businesses seeking SBA's loans, there could be some additional costs associated with verification of their small business status. However, small business lenders have an option of using the tangible net worth and net income-based alternative size standard instead of using the industry-based size standards to establish eligibility for SBA's loans. For these reasons, SBA believes that these added administrative costs will be minor because necessary mechanisms are already in place to handle these added requirements.

Additionally, some Federal contracts may possibly have higher costs. With a greater number of businesses defined as small due to the inflation adjustment, Federal agencies may choose to set aside more contracts for competition among small businesses only instead of using a full and open competition. One may surmise that this might result in a higher number of small business size protests and additional processing costs to agencies. However, the SBA's historical data on size protests shows that the number of size protests actually decreased after an increase in number businesses qualifying as small as a result of size standards revisions as part of the first five-year review of size standards. Specifically, on an annual basis, the number of size protests dropped from about 600 during fiscal years 2011-2013 (review of most receipts-based size standards was completed by the end of FY 2013) to about 500 during fiscal years 2018-2020. That represents a 17 percent decline.

Moreover, the movement of contracts from unrestricted competition to small business set-aside contracts might result in competition among fewer total bidders, although there will be more small businesses eligible to submit offers under the proposed size standards. However, any additional costs associated with fewer bidders are expected to be minor since, by law, procurements may be set aside for small

businesses under the 8(a)/BD, HUBZone, WOSB, EDWOSB, or SDVOSB programs only if awards are expected to be made at fair and reasonable prices.

Costs may also be higher when full and open contracts are awarded to HUBZone businesses that receive price evaluation preferences. However, with agencies likely setting aside more contracts for small businesses in response to the availability of a larger pool of small businesses under the higher inflation-adjusted size standards, HUBZone firms might receive fewer full and open contracts, thereby resulting in some cost savings to agencies. However, such cost savings are likely to be minimal as only a small fraction of unrestricted contracts are awarded to HUBZone businesses.

An increase in the number of new applicants to the SBA economic disadvantage programs and an increase in the number of participants eligible for 8(a) sole source awards has similar costs for the programs and for the new applicants and current participants, as discussed in the previous paragraphs. The increase in the number of participants in the programs will not affect the SBA costs of providing services to these business concerns, because the administrative structure is already in place.

For the above reasons, SBA estimates that these added administrative costs associated with this rule will be
de minimis
because necessary mechanisms are already in place to handle these added requirements.

Transfer Impacts of Increases to Size Standards

The inflation-adjusted size standards adopted in this rule may result in some redistribution of Federal contracts between the newly-qualified small businesses and large businesses and between the newly-qualified small businesses and small businesses under the current size standards. However, it would have no impact on the overall economic activity since total Federal contract dollars available for businesses to compete for will not change with changes to size standards. While SBA cannot quantify with certainty the actual outcome of the gains and losses from the redistribution of contracts among different groups of businesses, it can identify several probable impacts in qualitative terms. With the availability of a larger pool of small businesses under the higher inflation-adjusted size standards, some unrestricted Federal contracts that would otherwise be awarded to large businesses may be set aside for small businesses. As a result, large businesses may lose some Federal contracting opportunities. Similarly, some small businesses under the current size standards may obtain fewer set-aside contracts due to the increased competition from larger businesses qualifying as small under the inflation-adjusted size standards. This impact may be offset by a greater number of procurements being set aside for small businesses because of more businesses qualifying as small under the inflation-adjusted size standards. With larger businesses qualifying as small under the higher inflation-adjusted size standards, smaller small businesses could face some disadvantage in competing for set-aside contracts against their larger counterparts. However, SBA cannot quantify these impacts.

Congressional Review Act

Subtitle E of the Small Business Regulatory Enforcement Fairness Act of 1996 (codified at 5 U.S.C. 801-808), also known as the Congressional Review Act or CRA, generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to each House of the Congress and to the Comptroller General of the United States. SBA will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States. A major rule under the CRA cannot take effect until 60 days after it is published in the
Federal Register
. OMB's Office of Information and Regulatory Affairs has determined that the final rule provisions and interim rule provisions are not a “major rule” as defined by 5 U.S.C. 804(2).

Regulatory Flexibility Act

According to the Regulatory Flexibility Act (RFA), 5 U.S.C. 601-612, when an agency issues a rulemaking, it must prepare a regulatory flexibility analysis to address the impact of the rule on small entities. Accordingly, below, the Agency provides final regulatory flexibility analysis of the final rule provisions and initial regulatory flexibility analysis of the interim provisions of this rulemaking.

Regulatory Flexibility Analysis—Final Regulatory Flexibility Analysis

Under the Regulatory Flexibility Act (RFA), the final rule provisions of this rulemaking may have a significant impact on a substantial number of small businesses in the industries and subindustries with monetary-based size standards. As described in the July 2019 IFR, the final rule provisions of this rulemaking may affect small businesses in those indus

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2022-24595. Public record. Not legal advice.