Small Business Size Regulations

SMALL BUSINESS ADMINISTRATION

13 CFR Part 121

Small Business Size Regulations

AGENCY: Small Business Administration.

ACTION: Proposed rule.

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SUMMARY: In response to President Clinton's government-wide regulatory

reform initiative, the Small Business Administration (SBA) has

completed a page-by-page, line-by-line review of all of its existing

regulations to determine which might be revised or eliminated. This

proposed rule would improve the Agency's size program by simplifying

and clarifying language in the existing rules, conforming these rules

to present SBA policies and practices, and providing some substantive

modifications to streamline the delivery of services to the public. The

revised regulations would be more understandable and much easier to

use. The proposed rule would reduce the number of sections. It would

make the definition of ``affiliation'' more concise. While no longer

recognizing an absolute right to appeal size determinations, it would

give the Office of Hearings and Appeals (OHA) discretionary authority

to accept size appeals. The proposed rule would improve language, but

would not change the existing size standards which apply to particular

industries.

DATES: Comments must be submitted on or before December 26, 1995.

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ADDRESSES: Written comments should be addressed to David R. Kohler,

Regulatory Reform Initiative Team Leader, Attention: Part 121, Office

of General Counsel, Small Business Administration, 409 3rd Street,

S.W., Suite 13, Washington, D.C. 20416.

FOR FURTHER INFORMATION CONTACT: John W. Klein, Chief Counsel for

Special Programs, Office of General Counsel, at (202) 205-6645.

SUPPLEMENTARY INFORMATION: On March 4, 1995, President Clinton issued a

Memorandum to federal agencies, directing them to simplify their

regulations. In response to this directive, SBA has completed a page-

by-page, line-by-line review of all of its existing regulations to

determine which might be revised or eliminated. This proposed rule

would amend SBA's regulations governing its size program which was

authorized to be established by sections 3(a) and 5(b)(6) of the Small

Business Act, 15 U.S.C. 632(a), 634(b)(6). It is designed to streamline

the size standards operation by simplifying and clarifying existing

regulatory language and by eliminating unnecessary, irrelevant, or

obsolete provisions. SBA examined the purpose of each section of the

existing regulation in developing this proposal. Where appropriate, it

eliminated, consolidated, or rewrote sections for ease of use and

clarity. The proposed unnumbered substantive category headings would

be: Provisions of General Applicability, Size Standards Used to Define

Small Business Concerns, Size Eligibility Requirements for SBA

Financial Assistance, Size Eligibility Requirements for Government

Procurement, Size Eligibility Requirements for Sales or Lease of

Government Property, Size Eligibility for the Minority Enterprise

Development (MED) Program, Size Eligibility Requirements for the Small

Business Innovation and Research (SBIR) Program, Size Eligibility

Requirements for Paying Reduced Patent Fees, Size Eligibility

Requirements for Compliance with Programs of Other Agencies, Procedures

for Size Protests and Requests for Formal Size Determinations, Appeals

of Size Determinations and SIC Code Designations, Eligibility of

Organizations for the Handicapped for Small Business Set-asides, and

Waivers of the Nonmanufacturer Rule. The proposed rule would amend

office titles to reflect a previous reorganization of functions within

the structure of SBA.

SBA has attempted to rewrite Part 121 in plain English in order to

make the regulations more readable and less confusing. SBA has

identified the following eight significant changes proposed by this

rule.

Refine the definition of ``affiliation.'' The proposed rule at

Sec. 121.103(a) would make the definition of ``affiliation'' more

concise. The intent in revising the provisions pertaining to

affiliation is to make the definition easier to understand.

Additional exclusions from ``affiliation'' coverage. Four

additional exclusions from ``affiliation'' coverage are proposed in

Sec. 121.103(a)(2): (1) small businesses that are members of approved

pools for a joint program of research and development, (2) concerns

that lease employees from a concern whose principal business is leasing

employees to other businesses, (3) mentor/protege firms participating

in Federal Mentor-Protege programs, and (4) for purposes of eligibility

for the Small Business Investment (SBIC) program only, certain

investors in SBIC portfolio concerns, provided the investors do not

control the concern other than to the extent that would be permitted

for SBICs under the SBIC regulations (currently, Sec. 107.801 of this

title; in the revised SBIC regulations at Sec. 107.865).

Revision of ``annual receipts'' definition. This definition would

be simplified by incorporating figures already contained on a concern's

Federal Income Tax return for purposes of calculating a concern's

average annual receipts. In addition, amounts collected for another by

a conference management services provider or an advertising agent would

be excluded from a concern's annual receipts, similar to that of a

travel agent.

Grant OHA discretionary authority to hear size determination

appeals. Contracting officers for procuring agencies have cited

unwelcome delays in the procurement process when small business size

determinations are appealed to the Office of Hearings and Appeals

(OHA). Under existing SBA regulatory guidelines, a party which is

adversely affected by a size determination has the right to appeal the

determination to OHA. However, Federal Acquisition Regulations (48

C.F.R. 19.302) provide that a contracting officer is not required to

suspend award after a size determination is made even if the

determination is appealed to OHA, and further provide that the OHA

decision applies to a pending acquisition only if the decision is

received before award. Therefore, if the OHA decision is to have

relevance, it must be rendered prior to award. In an effort to

streamline consideration of size determinations and bring more speed to

the decision-making process, proposed Sec. 121.1101 would eliminate

appeals to OHA as a matter of right and instead give OHA discretion to

review such appeals. A size determination rendered by an authorized

Agency official would be considered final unless OHA agreed to review

the determination. This would give OHA the latitude to consider those

cases which have precedential value or which might involve clear error

of fact or law. Procedures for requesting discretionary review of size

determinations would be set forth in part 134.

Change the time when size is determined for MED application

purposes. Under the present regulations, an applicant to SBA's MED

program is small if, at the time of its application, it is small under

the size standard for its primary industry. The proposed regulation

would change the time for determining the applicant's size to the time

when SBA issues its eligibility determination. Thus, under the proposed

regulation, a concern which was small when it applied but which became

large during SBA's consideration of its application would not be

permitted to enter the program. SBA does not believe that it should

admit a concern to the MED program knowing that it is no longer small

in its primary business. The concern could no longer obtain 8(a) or

small business set-aside contracts in its primary industry, and the

concern could be perceived to be other than disadvantaged because of

that success. In addition, if that were the only business that the

concern was in, SBA would be put in the awkward position of admitting

the concern to the program one day, but initiating termination

proceedings from the program the next.

Use of size standards for programs of other agencies. This proposed

rule sets forth the limited circumstances under which the Secretary of

a department or the head of a Federal agency may prescribe, for the use

of such department or agency, a size standard other than one which has

been established by SBA.

Individual waivers of the ``Nonmanufacturer Rule.'' The proposed

rule establishes procedures for granting waivers of the Nonmanufacturer

Rule for individual products on specific solicitations. Procedures for

granting individual waivers would be combined with provisions

pertaining to class waivers.

Other changes to Part 121. This proposed rule would also make

changes in the size eligibility requirements which are identified below

in the section-by-section analysis. Several

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typographical errors or inadvertent omissions would be corrected, and

several obsolete or irrelevant references would be eliminated. The

proposed rule would not make any changes in actual size standards

applicable to specific industries.

Section-by-Section Analysis

The following is a section by section analysis of each provision of

SBA's regulations that would be affected by this proposed rule:

The current Sec. 121.101 is a policy statement reciting

Congressional intent as set forth in the Small Business Act. SBA

proposes to revise Sec. 121.101 to state succinctly the purpose of

small business size standards.

Section 121.102 would be deleted and the substance of the provision

moved to the revised Sec. 121.101.

Present Sec. 121.201 would be deleted and the substance of

subsection (a) consolidated with proposed Sec. 121.101. Present

subsection (b) is a philosophical statement relating to Federal

assistance in general and would be eliminated as unnecessary. The

general outline of SBA's size program, contained in Sec. 121.202, would

be deleted as unnecessary since revised Sec. 121.101 would provide

general guidance as to the purpose of size standards and how SBA

establishes them. Revised Sec. 121.201 would detail specific size

standards, and revised Secs. 121.301 through 121.903 would describe the

relationship of size standards for specific types of Federal

assistance. Procedures for size protests and requests for size

determinations would be found in proposed Sec. 121.1001. Appeals of

size determinations and SIC code designations would be covered in

proposed Sec. 121.1100.

Section 121.102 would be amended to explain, in summary fashion,

how SBA develops or revises an industry size standard. Two criteria for

size standards have gained general acceptance since SBA's inception and

are the most widely used definitions of small business. The first is

the 500 employee size standard, which is the most common size standard

among the manufacturing and mining industries. Instituted by the

Smaller War Plants Administration and adopted with the formation of

SBA, it applies to a majority of these industries. The second is the

average annual receipts standard, which applies to most retail and

service industries and also dates back to the inception of SBA. In

1953, a limit of $1.0 million in average annual receipts was applied to

many of these industries. Over time, inflation and industry changes

have increased that original level to $5 million. Size standards for

particular industries deviate from these ``anchor standards'' depending

on the structural characteristics of the industry and other factors

described in SBA's rulemaking actions as important influences on an

industry's structure. Proposed Sec. 121.102 would identify the factors

SBA considers in setting any size standard, including degree of

competition in an industry, average firm size in the industry, start-up

costs and entry barriers in the industry, and distribution of firms by

size in the industry.

Section 121.203 would be deleted and the substance of the provision

would be contained in revised Sec. 121.1006(h)(3).

Section 121.204 would be deleted. The substance of the provision

would be incorporated in revised Secs. 121.1006(h)(3) and 121.1007.

Section 121.205 would be eliminated as unnecessary.

The subject of Secs. 121.301(a) and 121.301(b) would be transferred

to Sec. 121.102(b), with the provision amended for relevance. Section

121.301(c) would be deleted as unnecessary since proposed Sec. 121.201

would contain a statement that the general size standard for all

industries not listed in the table in Sec. 121.201 would be $5 million.

Sections 121.302 and 121.304 would be eliminated as unnecessary.

The roles of the Office of General Counsel and OHA are described in

Part 101 of SBA's regulations. Section 121.303 would be deleted, but

the address of the Size Policy Board would be contained in the revised

Sec. 121.102(c).

Section 121.305 would be eliminated. SBA has materially changed the

role of its regional offices, transferring to other SBA offices many of

the functions formerly performed by regional offices. The descriptions

of responsibilities with respect to size determinations and SIC code

designations would be transferred to revised Secs. 121.402 and

121.1002.

Definitions of terms, presently found in Secs. 121.401 through 407,

would be transferred to a new Sec. 121.103. Changes in some definitions

are proposed.

The definition of affiliation in current Sec. 121.401 would be

transferred to Sec. 121.103(a) and revised for clarity. Subsection

(a)(1) would be redesignated as Sec. 121.103(a)(1)(iii). Subsections

121.401(a)(2)(i) and (ii) would be redesignated as subsection

121.103(a)(1)(i)(A) and (B). Provisions addressing ``identity of

interest'' now found in Secs. 401(a)(2)(iii) and 401(d) would be

transferred to the policy statement contained in proposed

Sec. 121.103(a)(1)(i)(C). The term is a legitimate concept in

characterizing affiliation among parties, but it is dependent on

specific facts in its application and is subject to a high degree of

subjectivity in much of its implementation. While simpler, the

designation of a list of family relationships that would always cause

an ``identity of interest'' would penalize a number of legitimate small

concerns. Close familial relationships are at times offset by

estrangement of the parties. Under the circumstances, SBA has

determined that a flexible approach should be retained in the size

regulations.

Section 121.401(b), pertaining to exclusions from the definition of

affiliation, would be transferred to a new Sec. 121.103(a)(2) which

would list and describe seven exclusions.

In addition to the exclusion from affiliation for SBICs or

Development Companies, the proposed rule would add a second exclusion,

for purposes of SBIC assistance, for concerns owned by venture capital

firms, pension funds, and certain charitable entities exempt from

federal taxation under Sec. 501(c) of the Internal Revenue Code. Like

SBICs, these entities often make financial investments in small

companies when they receive ownership positions which can be held for

subsequent resale. The same control limitations imposed by SBA on SBICs

would be imposed on the investors covered by this affiliation

exclusion.

The exclusion for business concerns owned and controlled by Indian

Tribes, Alaska Regional or Village Corporations organized pursuant to

the Alaska Native Claims Settlement Act, or Native Hawaiian

Organizations would be clarified so that affiliation would not be found

solely by reason of such ownership, but still could be found where

other grounds (e.g., common management) exist.

The exclusion for businesses owned or controlled by Community

Development Corporations was added to SBA regulations on June 7, 1995,

and would be retained with only minor editorial adjustments.

The proposed rule would add an exclusion be for small businesses

that are members of pools approved by the Administrator, after

consultation with the Attorney General and the Chairman of the Federal

Trade Commission, for a joint program of research and development.

Concerns which are members of such pools would not be considered

affiliated with other pool members solely by reason of their joint

participation on pool approved activities. Such pools have been

statutorily authorized for some time, but there has not been a

corresponding

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exclusion from affiliation specifically recognized in the size

regulations.

The proposed rule would also add an exclusion from affiliation for

concerns that lease administrative and/or other employees from a

concern whose principal business is leasing employees to other

businesses. The two concerns would not be considered affiliated solely

by reason of the leasing agreements.

Finally, the proposed rule would add an exclusion for firms

participating in Federal Mentor-Protege Programs. Although affiliation

would not be found based solely on such mentor-protege relationship,

affiliation could be found to exist based on other factors.

Section 121.401(c), pertaining to the nature of control, would be

eliminated in the revised affiliation rule. Affiliation by stock

ownership and common management would be addressed in proposed

Secs. 121.103(c) and (d). The non-essential elements of affiliation

expressed in current subsection 401(c) would be eliminated without

sacrificing clarity or definitiveness.

Section Sec. 121.401(e), redesignated as Sec. 121.103(c), would be

clarified.

Section 121.401(f), redesignated as Sec. 121.103(d), would clarify

what constitutes an agreement in principle, and make other minor

editorial changes.

Section 121.401(g) now requires SBA to determine whether a voting

trust was entered into primarily for a ``legitimate purpose.'' Since

such a requirement is unnecessary and overly subjective, it would be

eliminated.

The proposed rule would redesignate Sec. 121.401(h), pertaining to

common management, as Sec. 121.103(e), and clarify that common

management must control both the firm whose size status is at issue and

one or more other concerns in order to constitute affiliation. It would

eliminate the references to key employees, but provide that affiliation

can exist where the chief executive officer, one or more general

partners, or one or more members of the board of directors, control the

board of directors or management of another concern.

The proposed rule would eliminate Secs. 121.401(i) and (j) as

separate bases for affiliation. Most firms simply sharing common

facilities do not act in concert, and SBA believes that there is little

likelihood of abuse if this provision is eliminated. Similarly, the

``newly organized concern'' basis for affiliation seldom appears alone,

and its elimination as a separate basis for affiliation would not

eliminate the underlying reasons for finding affiliation on other

grounds.

Section 121.401(k) would be eliminated as a separate basis for

affiliation, but referenced as a factor that may cause affiliation

under the totality of circumstances in proposed Sec. 121.103(a)(2).

Affiliation through joint ventures would be moved from

Sec. 121.401(l) to Sec. 121.103(f). The proposed rule would eliminate a

specific definition of the term joint venture as unnecessary. The

current regulations unintentionally define a joint venture as being

formed for a single, specific contract. SBA believes it to be obvious

that a joint venture may be formed to carry out more than one contract,

and the regulation will be so implemented. The revision also would be

reworded for brevity and clarity.

The provisions of Secs. 121.401(l)(2) and (3) would be redesignated

as Secs. 121.103(f)(1) and (2), respectively. The provisions would be

reworded for clarity, and provisions not affecting the substantive rule

would be eliminated.

Section 121.401(l)(4) (proposed Sec. 121.103(f)(3)) would be

amended in two respects. It would clarify that whether a subcontractor

should be considered a joint venturer depends on all circumstances

pertaining to the subcontract arrangement between the parties and does

not hinge solely on the percentage of subcontracted work. For example,

the fact that a subcontractor is to perform a relatively large

percentage of the total value of the contract might not cause SBA to

consider the arrangement a joint venture where the prime contractor

would be actively engaged in the performance of the contract and would

exercise a supervisory role. In addition, subcontractors that supply

materials may be distinguished from subcontractors that perform work.

For example, a small business construction contractor would not be

deemed an affiliate of a large subcontractor from which needed asphalt

constituting more than 50 percent of the value of the contract was

purchased where the large business was scheduled to perform no work on

the contract other than the cost of the asphalt.

Section 121.401(l)(5) would be reworded for clarity and

redesignated as Sec. 121.103(f)(4).

The franchise rule in Sec. 121.401(m) would be rewritten for

clarity and redesignated as Sec. 121.103(g).

The proposed rule would revise ``annual receipts'' in proposed

Sec. 121.104 (current Sec. 121.402) to mean gross or total income plus

cost of goods sold as reported on a concern's Federal income tax

return. The term is meant to include revenue from the sale of products

or services, interest, dividends, rents, royalties, fees, commissions,

or other income. The same allowances and proceeds collected for another

concern currently subtracted from receipts would continue to be

subtracted in the proposed rule. Accordingly, the size of a concern

would be based upon the information shown on the Federal income tax

return, as opposed to the present requirement of utilizing its regular

books of account. SBA specifically requests comments on this proposed

definition. Because SBA would use a concern's income tax return to

determine ``receipts,'' the concern would not be required to restate

its revenue under the accrual basis of accounting if its return was

filed other than under the accrual method as is presently the case.

The proposed rule would also exclude from the calculation of annual

receipts amounts collected for another by conference management

services firms. This action is being taken to better measure the

magnitude of operations of conference management services providers. In

response to a decision of the United States District Court for the

District of Columbia (Civil Action No. 91-1569), the proposed rule

would also exclude such ``pass-through'' amounts would also be excluded

for advertising agents.

The SBA reviews requests to exclude revenues of certain business

activities on a case-by-case basis. In an August 25, 1992 proposed rule

(See 57 FR 38452), SBA noted characteristics under which it might be

appropriate to exclude from a concern's revenues certain funds received

from a client firm to be transmitted to an unaffiliated third party.

These include the following five characteristics:

(1) A broker or agent-like relationship between a firm and its

third party provider exists that represents a dominant or crucial

activity of firms in these industries.

(2) The pass-through funds associated with the broker or agent-

like relationship is a significant proportion of total receipts.

(3) As the normal business practice of firms in the industry, a

firm's income remaining after the pass-through funds are remitted to

a third party is typically derived from a standard commission or

fee.

(4) Firms do not usually consider billings that are reimbursed

to other firms as their own income, preferring instead to count only

those receipts that are retained for their own use.

(5) Federal government agencies which engage in the collection

of statistics and other industry analysts usually represent receipts

of the firms on an adjusted receipts basis.

An analysis of the conference management services industry suggests

that most of these characteristics are shared by concerns active in

this industry. Conference management

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services firms provide a range of services in support of organizing and

facilitating conferences, such as travel, lodging, ground

transportation, honoraria and other administrative support services.

The sponsoring organization is responsible for developing the

conference and its contents and for all conference expenses. The

conference management service provider principally acts as an agent on

behalf of the sponsoring organization by arranging for various support

services in connection with the conference and provides few, if any, of

the support services itself. The arrangements made through the

conference management services provider to a third party provider are

paid using the sponsoring organization's funds or by the conference

management services provider and later reimbursed by the sponsoring

organization. The pass-through monies paid to third-party providers

generally account for a majority of the total expenses incurred by the

conference management services provider. The conference management

services provider's earnings are based on fees or commissions from

these activities.

The scope of activities and business operations of conference

management services providers appear to conform with the

characteristics outlined above to support the exclusion of funds

received in trust for an unaffiliated third party. The SBA believes

that the revenues a conference management services provider received

for a third party provider represents revenues intended for the third

party. Accordingly, an exclusion of these types of revenues is

warranted. The fees and commissions earned by the conference management

services provider from its activities is also a more representative

measure of the magnitude of operations of the firm and of the services

provided.

Before a final decision is made on the exclusion of pass-through

revenues for conference management services firms, the SBA would find

additional information helpful on the practices of firms in the

conference management services industry. In particular, the SBA seeks

comments from the public concerning the typical relationship between

clients of conference managers and conference management services

providers themselves. Pertinent information would include:

(1) To what extent are funds passed through to other vendors in

this industry, particularly the extent of booking costs for

transportation, lodging and meeting room space?

(2) To what extent are funds ``escrowed'' in which the client

firm provides an account to be used by the conference facilitator to

``perform a condition'' and meet ongoing expenses? What is the

typical nature of these accounts in ownership and liability terms?

(3) Are conferences typically planned by the client firm or the

independent conference planner? Who prepares the program and selects

the speaker? Does the conference management services provider

usually act as a mere facilitator or as a planner in which the

entire production would be planned by the conference management

services provider?

(4) How does the conference management services provider recover

costs and make profits? Are arrangements normally on a cost-plus

fixed-fee basis, a standard commission basis or fixed price?

This proposed rule does not change the current size standard of

$5.0 million applicable to firms in SIC 8741, Management Services.

However, if pass-through funds are excluded from the calculation of

revenues for conference management services firms as proposed, it would

effectively increase the size standard applicable to these type of

firms. At this time, the SBA does not have available data to determine

if the $5.0 million size standard continues to be appropriate for the

conference management services industry. Accordingly, the SBA is also

seeking information on the economic characteristics of conference

management services firms, such as average firm size, the degree of

concentration, the size distribution of firms, start-up costs and the

difficulty of entry. Other information which may influence the size

standard, and the need for a new size standard, may also be submitted.

The SBA will consider this information to assess the appropriateness of

the current size standard, which may lead to a future rulemaking

proposing a different size standard than $5.0 million.

This proposed rule would also clarify that SBA may use all

available information to determine annual receipts when making a size

determination, especially if other information is available which

disputes a firm's Income Tax returns.

Section 121.402(e)(i) would be redesignated as Sec. 121.104(d) and

amended to add language indicating that the annual receipts for a

concern and its affiliates are calculated in accordance with proposed

Sec. 121.104(b) even though this may result in different time frames

being used to calculate the concern's and affiliate's revenues.

Sections 121.403(a) and (b) would be redesignated as

Secs. 121.105(a) and (b), respectively, and revised for clarity. A new

subsection (c) would be added to make it clear that if one entity is

replaced by another having the same assets and liabilities, the

successor firm is not a new entity for purposes of calculating annual

receipts/employees.

The current definition of employees in Sec. 121.404 would be

combined with the definition of number of employees in Sec. 121.407

into proposed Sec. 121.106, and rewritten for clarity. The proposed

rule would eliminate the list of numerous factors bearing on the issue

of whether individuals are employees of a concern or employees of an

independent employment contractor, and simply authorize SBA to look at

all relevant factors concerning the issue.

The provisions of Sec. 121.406 would be eliminated as unnecessary.

Language indicating that dominance is taken into account in the setting

of industry size standards would be added to proposed Sec. 121.102.

The proposed rule would add a new Sec. 121.107 which states the

existence of statutory penalties for misrepresentations of size status.

The substance of Sec. 121.601 would be redesignated as

Sec. 121.201, which would be amended to eliminate unnecessary language.

The size standards table identified by SIC industry would be

greatly streamlined. The redesigned size standard table would list the

size standard applying to each Division within the SIC System and each

Major Group within that Division if different from the general Division

size standard. Only those industries having a size standard different

from the applicable Division or Major Group size standard, or those to

which a footnote applies, would be specifically listed in the table by

four-digit SIC code. This change would eliminate the duplication of

listing four-digit SIC code after four-digit SIC code within a Division

or Major Group with identical size standards.

The asterisks identifying new SIC codes for 1987 would also be

eliminated from the table as no longer relevant or useful.

Many of the footnotes to the size standards in proposed

Sec. 121.201 would be clarified and simplified. Some footnotes have

been deleted resulting in the need to renumber remaining ones as

identified below. Size standards themselves would not be amended by

this proposed rule.

Footnote 1 would be deleted as unnecessary. The Table of Size

Standards itself, as well as the introductory language to the Table,

indicates that size standards are in number of employees or average

annual receipts unless otherwise specified.

Footnote 2, redesignated as footnote 1, would be clarified to

indicate that the 40 percent requirement in the footnote

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applies to government procurement only.

Footnotes 3, 4, and 5, redesignated as footnotes 2, 3, and 4,

respectively, would be reworded for clarity.

Footnote 6, redesignated as footnote 5, would be amended by

replacing the words ``which it manufactured worldwide'' with the words

``comprising its total worldwide manufacture'' to clarify that SBA

intended no difference in the application of those words.

The substance of footnote 7 would be transferred into the size

standard table for SIC code 4212, and the footnote eliminated.

Footnote 8 would be incorporated into the Table, and eliminated as

a separate footnote.

Footnote 9 would be eliminated as unnecessary.

Footnote 10, redesignated as footnote 6, would clarify that gross

commissions of a travel, real estate or advertising agency are to be

counted when determining such a concern's size, whether paid directly

(e.g., through some sort of escrow account) or indirectly (i.e.,

received first by the agency and then paid to the individual) to

individual agents of the concern. SIC codes relating to advertising

agents (SIC codes 7311, 7312, 7313, and 7319) and that part of SIC code

8741 dealing with conference management service providers would be

added to this footnote.

The substance of footnotes 11 and 12 would be incorporated into the

size standard table for SIC codes 4212 and 5599 respectively, and the

footnotes eliminated.

Footnote 13 would be deleted as duplicative of restrictions on

financial assistance covered in Part 120.

Footnote 14, redesignated as footnote 6, would be revised to

incorporate the substance of existing Secs. 121.1402(a) and (b).

Footnote 15, redesignated as footnote 7, would be rewritten for

clarity.

Footnote 16 would be eliminated and its substance combined with the

statement at the beginning of the size standards chart dealing with the

$5 million alternate size standard.

Footnotes 17, 18 and 20 would be clarified for ease of use and

renumbered as footnotes 9, 10, and 12, respectively.

Footnotes 21 and 22 would be incorporated into the size Table, and

eliminated as separate footnotes.

Footnote 23 would be redesignated as footnote 13.

Sections 121.801 and 121.802 (proposed Secs. 121.301 and 121.302)

would be amended for clarity and ease of use. The proposed rule would

eliminate differentials in size standards for Redevelopment Areas.

Differentials for Redevelopment Areas would be eliminated because

almost all counties are so designated, and such designations tend to be

permanent or long lasting designations once designated.

Section 121.803(a) (proposed Sec. 121.303(a)) would be amended to

clarify that the size of an applicant for financial assistance is

determined as of the date the application for such assistance is

received by SBA (or, in the case of the preferred lenders program, the

date of approval of the loan by the Preferred Lender).

The current Sec. 121.803(b) would be eliminated since it is covered

in revised Sec. 121.103(d).

Section 121.803(c), redesignated as Sec. 121.303(b), would be

rewritten for clarity.

Sections 121.804 through 121.806 (proposed Secs. 121.304 through

121.306) would be rewritten for clarity and ease of use. SBA's

Government Contracting Area Directors also would be substituted for

staff in regional offices. They are familiar with size issues and

principles because of their work in the government procurement area and

have sufficient knowledge and expertise to make size determinations

pertaining to financial assistance.

Proposed Sec. 121.307 would clarify that a MED concern which

qualifies for award of a specific 8(a) subcontract would be eligible

for SBA financial assistance to finance the subcontract.

Section 121.901, redesignated as Sec. 121.401, would clarify that

it covers MED issues, but that additional size issues pertaining to the

MED program are discussed in Secs. 121.601 through 121.604.

Sections 121.902 and 121.903 would be redesignated as Secs. 121.402

and 121.403, respectively, and revised for clarity.

Section 121.904, redesignated as Sec. 121.404, would be rewritten

for clarity and ease of use. The substance of subsection 121.904(b) has

been transferred to proposed Sec. 121.103(a)(4). Subsection (c) has

been eliminated, and subsection (d) redesignated as subsection (b).

This section would also call for determining size as of the date of

best and final offers in negotiated procurements (rather than the date

of self-certification) when a size protest alleges that a small

business dealer is not supplying the product of a small business

manufacturer or that a small business' subcontracting plan creates a

joint venture that should be considered large. A concern's proposed

supplier or subcontractors often will change during the process of

negotiation, and it is unreasonable to expect subcontracting plans to

be finalized at the time a concern self-certifies and submits its

initial offer on the solicitation.

Sections 121.905 and 121.906, redesignated as Secs. 121.405 and

121.406, respectively, would be amended for clarity and ease of use.

Section 121.907 would be redesignated as Sec. 121.407, with the

example deleted as unnecessary.

Section 121.908 would be redesignated as Sec. 121.408. Subsections

(a) and (b) would be consolidated and would clarify that a formal size

determination is required if the size status of an applicant for a COC

is at issue. Subsection (c) would be eliminated as duplicative (see

Sec. 121.404), and subsection (d) redesignated as subsection (b).

Section 121.909 would be redesignated as Sec. 121.409.

Section 121.910 would be redesignated as Sec. 121.410. Minor

editorial changes and a corrected cross-reference would be made in

subsections (a) and (b). Language referring to subcontracting for

financial services under section 8(d) of the Small Business Act would

be transferred to a new subsection (c).

Section 121.911 would be redesignated as Sec. 121.411, and

rewritten for clarity. Cross-references to sections would be corrected

and a clarification made that prime contractors must notify

unsuccessful offerors for Section 8(d) subcontracts of the apparent

successful offeror to enable unsuccessful offerors to timely protest

the size of the apparent successful offeror where appropriate.

A new Sec. 121.412 would be added to the regulations to clarify

that a concern must meet the applicable size standard only for that

portion of a partial small business set-aside that is set-aside for

small business. The concern is not required to qualify as a small

business for that portion of a requirement that is open to both small

and large business concerns. For instance, to be eligible as a small

business concern for petroleum refining in SIC Code 2911, a concern is

required to refine 90 percent of the petroleum from either crude oil or

bona fide feedstocks. On a partial small business set-aside, a concern

would have to meet this requirement on the portion of the offer that is

set-aside, but would not have to meet this requirement on the

unrestricted portion.

Sections 121.1001 through 121.1003 would be redesignated as

Secs. 121.501 through 121.503, and reworded for clarity.

Section 121.1004(a) would be redesignated as Sec. 121.504, and

reworded for clarity. The substance of subsection

[[Page 57988]]

(b) would be transferred to proposed Sec. 121.103(a)(4).

Section 121.1005 would be redesignated as Sec. 121.505, and

reworded for brevity.

Proposed Sec. 121.506 consolidates definitions (important for sales

and leases of Government-owned timber) that are presently contained in

different sections.

Section 121.1006, redesignated as Sec. 121.507, clarifies that the

Alaskan resale limitation applies when the original purchaser, and not

necessarily the repurchaser, is an Alaskan business.

Sections 121.1006 through 121.1010 would be renumbered as

Secs. 121.507 through 121.511, and reworded for clarity and brevity.

Section 121.1011, redesignated as Sec. 121.512, would clarify that

SBA considers a concern's affiliates in determining the size of a

stockpile purchaser.

Sections 121.1012 and 121.1013 would be redesignated as

Secs. 121.513 and 121.514, respectively, and amended for clarity and

brevity.

Section 121.1101 would be eliminated as unnecessary.

Section 121.1102 would be reorganized for clarity. The substance of

subsections (a)(1), (a)(2), and (b)(1) would be redesignated as

Secs. 121.601, 121.604(a), and 121.603, respectively. The substance of

subsections (b)(2), (c) and (d) would be consolidated into

Sec. 121.402.

Section 121.1103 would be reorganized for clarity. The substance of

subsections (a), (b), and (c) would be redesignated as Secs. 121.602,

121.604(a), and 121.605, respectively. The substance of subsection (d)

would be consolidated into Sec. 121.404(b).

Section 121.1104 would be redesignated as Sec. 121.604, and amended

for clarity.

Sections 121.1105 and 121.1106 would be consolidated into

Secs. 121.405 and 121.406, respectively.

The substance of 121.1108 would be redesignated as Sec. 121.605.

Section 121.1201 would be redesignated as Sec. 121.701 and the

definition of funding agreement in Sec. 121.1202(b) would be moved to

this section in order to keep definitions in one place.

Section 121.1202 would be redesignated as Sec. 121.702 and the

language would be simplified.

Section 121.1203 would be redesignated as Sec. 121.703 and

rewritten for clarity.

Section 121.1204 would be redesignated as Sec. 121.704. The

reference to a firm of more than 500 employees being ineligible for

award would be deleted as duplicative of revised Sec. 121.702. Section

121.1205 would be redesignated as Sec. 121.705 and amended for clarity.

Sections 121.1301 through 121.1305 would be redesignated as

Secs. 121.801 through 805, respectively, with slight changes for

clarity.

Sections 121.1401 through 121.1405 would be deleted as unnecessary

since size eligibility of financial institutions for subcontracting

purposes would be addressed in proposed Sec. 121.410(c) and footnote 9

of proposed Sec. 121.201.

Section 121.1501, redesignated as Sec. 121.901 and rewritten for

clarity, would address the procedures for size determinations and

discretionary appeals currently set forth in Sec. 121.1505.

Sections 121.1502 and 121.1503 would be consolidated into a new

Sec. 121.902.

A proposed amendment of Sec. 121.1502 was published in the Federal

Register (58 Fed. Reg. 44620) for public comment on August 23, 1993. It

would have implemented Section 222 of Public Law 102-366, amending the

Small Business Act, to delineate the limited circumstances under which

a Federal department or agency may prescribe its own standard for

determining whether an entity is a small business concern. After

reviewing public comments, SBA has decided to publish for further

comment a new proposal for the rule as part of this proposed rule.

After publication of the initial proposal, Congress modified

Section 3(a)(2) of the Small Business Act further, thereby affecting

two aspects of the proposed rule (See Sec. 301, Public Law 103-403).

Public Law 103-403 modified the time period for determining the size of

a manufacturing concern from ``over a period of not less than three

years'' to ``a manufacturing concern's pay periods for the preceding 12

months.'' This modification makes the time period of measurement of a

manufacturing concern's size consistent with the time period used by

SBA in calculating the size of other business concerns subject to an

employee-based size standard. Public Law 103-403 then expanded upon the

types of size standard measures that could be used for certain

industries. While Sec. 301 requires that the number of employees be

used to determine the size of a manufacturing concern, and gross

receipts used to determine the size of concerns providing services,

Sec. 301 permits these or some other measure of size to be used for

size standards for all other industry categories (e.g., retail trade,

wholesale trade, and construction). Other measures of size standards

could include net worth, net income, or some other quantitative measure

that appropriately delineates business concerns by size. These

statutory modifications have been incorporated into this final rule.

The current statutory provisions under Section 3(a)(2) of the Small

Business Act establish certain requirements for the development of size

standards by a Federal department or agency. Those requirements would

be repeated in the regulations under this proposal. The head of a

Federal department or agency may only prescribe a size standard

different from that prescribed by SBA when it is for use in connection

with a program of the department or agency, and other statutory

criteria are met.

SBA proposes to adopt appropriate measures to implement this

statutory authority. As stated in revised Sec. 121.901, SBA applies the

rules and procedures contained in this regulation when making size

determinations for other agencies. This includes the definition of the

size standard measure as well as all other criteria related to the size

standard. SBA will consider the use of alternative definitions and

other size related criteria by other agencies where appropriate. As

required by statute, SBA also is publishing a list of non-SBA size

standards currently in effect. The list contained in this proposed rule

will be updated periodically by notices published in the Federal

Register as non-SBA size standards become established or when

additional existing non-SBA size standards are identified. The current

list is as follows:

Table of Statutory and Regulatory Size Standards Set by Agencies Other Than SBA

----------------------------------------------------------------------------------------------------------------

Agency/Program Size standard Cite

----------------------------------------------------------------------------------------------------------------

Bureau of Land Management, Timber SBA size standards........... 43 CFR 5400.0-5

Sales.

Department of Agriculture, SBIR Fewer than 500 employees; all 7 CFR 3403.2(o)

program. requirements of 13 CFR 121.

[[Page 57989]]

Department of the Air Force, SBA size standards........... 32 CFR 841.4

Licensing Government-Owned

Inventions.

Department of the Army, Timber Sales. SBA size standards........... 32 CFR 644.509

Department of Commerce, International ``Small business'' means any 19 CFR 353.12

Trade Administration, Antidumping business concern which, in

Duty Procedures. the agency's judgment, due

to its small size, has

neither adequate internal

resources nor financial

ability to obtain qualified

outside assistance in

preparing and filing

petitions and applications

for remedies and benefits

under trade laws. (19 USC

1339).

Department of Commerce, International ``Small business'' means any 19 CFR 355.12

Trade Administration, Countervailing business concern which, in

Duty Procedures. the agency's judgment, due

to its small size, has

neither adequate internal

resources nor financial

ability to obtain qualified

outside assistance in

preparing and filing

petitions and applications

for remedies and benefits

under trade laws. (19 USC

1339).

Department of Commerce, Licensing SBA size standards........... 37 CFR 404.3

Government-Owned Inventions.

Department of Commerce, Patent Rights SBA size standards........... 37 CFR 401.14

Clause.

Department of Commerce, Rights to SBA size standards........... 37 CFR 401.2

Inventions.

Department of Defense, Business Type 13 CFR part 121.............. 48 CFR 252.211-7020

Certification--Commercial Items.

Department of Defense, Contract Goals Section 8(d) of the Small 10 USC 2323

for Small Disadvantaged Businesses. Business Act.

Department of Defense, Notice of 13 CFR part 121.............. 48 CFR 252.219-7001

Partial Small Business Set-aside.

Department of Energy, Domestic ``[A]s defined by SBA''...... 10 CFR 760.1

Uranium Project.

Department of Energy, Electric and 13 CFR 121.310............... 10 CFR 791.3

Hybrid Vehicle Research,

Development, Demonstration and

Production Loan Guaranties.

Department of Energy, Financial Not dominant in its field; 10 CFR 600.3

Assistance Rules. independently owned and

operated; meets criteria of

SBA.

Department of Energy, Financial Not dominant in its field; 10 CFR 600.3

Assistance Rules--Grants. independently owned and

operated; meets criteria of

SBA.

Department of Energy, Geothermal Loan Not dominant in field; does 10 CFR 790.5

Guaranty Program. not have assets in excess of

$9 million or net worth in

excess of $4 million; does

not have average net income,

after Federal income tax,

for the preceding 2 years in

excess of $400,000.

Department of Energy, Patent Rights 13 CFR 121.3-8, 121.3-12..... 10 CFR 600.33

of Grantees.

Department of Energy, State Energy SBA regulations.............. 10 CFR 420.2

Conservation Program.

Department of Housing and Urban SBA size standards........... 24 CFR 135.5

Development, Employment

Opportunities for Businesses and

Lower Income Persons in Connection

with Assisted Projects.

Department of Labor, OSHA, 19 or fewer employees........ 29 CFR 1910.1027(p)(2)

Occupational Safety and Health

Standards, Cadmium.

Department of Transportation, Section 3 of the Small 49 CFR 23.62

Implementation of Sec. 105(f) of Business Act and SBA

the Surface Transportation regulations, except that a

Assistance Act of 1982. small business concern will

not include any concern or

group of concerns controlled

by the same socially and

economically disadvantaged

individual(s) which has

average annual gross

receipts in excess of $15

million over the previous 3

fiscal years (amount is

increased annually for

inflation).

Department of Transportation, Size See note below for size 49 CFR 23.89

Standards for Airport standards for specific

Concessionaires. airport concessionaires.

Department of Transportation, Uniform Small business is a business 49 CFR 24.2(t)

Relocation Assistance and Real having not more than 500

Property Acquisition for Federal and employees working at the

Federally Assisted Programs. site being acquired or

displaced by a project or

program, which site is the

location of economic

activity. Sites occupied

solely by outdoor

advertising signs, displays,

or devices do not qualify as

a business.

Environmental Protection Agency, Section 3 of the Small 40 CFR 30.6015

Cooperative Agreements and Superfund Business Act.

State Contracts for Superfund

Response Actions.

Environmental Protection Agency, SBA size standards........... 40 CFR 21.2

Issuance of Statements Required by

Sec. 7(g) of the Small Business Act.

Environmental Protection Agency, Small Business Act........... 40 CFR 33.005

Procurement Under Assistance

Agreements.

Environmental Protection Agency, 100 employees................ 42 USC 7661(f)

Stationary Source Technical and

Environmental Compliance Assistance

Program.

Family and Medical Leave Act......... Fewer than 50 employees...... Public Law 103-1, Sec. 101

[[Page 57990]]

FAR, Patent Rights, Retention by Section 2 of the Small 48 CFR 52.227-11

Contractor (Short Form). Business Act and SBA

regulations.

FAR, Patent Rights, Retention by Section 2 of the Small 48 CFR 52.227-12

Contractor (Long Form). Business Act and SBA

regulations.

FAR, Patent Rights Under Government 16 USC 632 and SBA 48 CFR 27.301

Contracts. regulations.

FAR, Size Standards.................. SBA size standards........... 48 CFR 19.102

FAR, Small Business Competitiveness Emerging small business: size 48 CFR 19.1002

Demonstration Program. is no greater than 50% of

numerical SIC size standard.

FAR, Socioeconomic Programs.......... 13 CFR 121 and not dominant 48 CFR 19.001

in field.

FAR, Utilization of Small Business Section 3 of the Small 48 CFR 52.219-8

Concerns and Small Disadvantaged Business Act and SBA

Business Concerns. regulations.

General Services Administration, 13 CFR part 121.............. 48 CFR 552.219-1

Small Business Concern

Representation.

Internal Revenue Service, Dollar- Average annual gross receipts 26 CFR 1.472-8

value Method of Pricing LIFO of the taxpayer for the 3

Inventories. preceding taxable years do

not exceed $5 million.

Internal Revenue Service, Loss on (1) Post-1978 stock: capital 26 CFR 1.1244(c)-2

Small Business Stock. receipts of small business

corporation may not exceed

$1 million (capital receipts

means aggregate dollar

amount received by the

corporation for its stock).

(2) Pre-1978 stock: sum of

aggregate amount to be paid

for pre-1978 stock may not

exceed $500,000.

Internal Revenue Service, S Fewer than 35 shareholders; 26 CFR 1.1361-1

Corporation Defined. no shareholder (other than

an estate or trust) who is

not an individual; no

nonresident alien as

shareholder; only one class

of stock.

Internal Revenue Service, Simplified Average annual gross receipts 26 USC 474

Dollar-value LIFO Method for Certain of the taxpayer for the 3

Small Businesses. preceding taxable years do

not exceed $5 million.

Internal Revenue Service, Subchapter Fewer than 35 shareholders; 26 USC 1361(b)(1)(A)

S Corporation. no shareholder (other than

an estate or trust) who is

not an individual; no

nonresident alien as

shareholder; only one class

of stock.

International Trade Commission, Trade SBA size standards........... 19 CFR 213.2

Remedy Assistance.

Interstate Commerce Commission, Small Business Act........... 49 USC 10701

Negotiated Rates Act.

NASA, Licensing of Inventions........ 13 CFR 121.3-8 and 121.3-12.. 14 CFR 1245.202

NASA, Patent Rights--Retention by 13 CFR 121.3-8 and 121.3-12.. 14 CFR 1260 App.

Grantee.

National Science Foundation, Patent 13 CFR 121.3-8 and 121.3-12.. 45 CFR 650.4

Rights of Grantee.

Patent and Trademark Office.......... 13 CFR 121.12................ 37 CFR 1.9

Regulatory Flexibility Act........... Section 3 of the Small 5 USC 601

Business Act, unless an

agency, after consultation

with the Office of Advocacy

of SBA and after opportunity

for public comment,

establishes one or more

definitions of such term

which are appropriate to the

activities of the agency and

publishes such definition(s)

in the Federal Register.

Securities & Exchange Commission, Small business issuer- 17 CFR 228.10

Integrated Disclosure System for revenues less than $25

Small Business Issuers. million; US or Canadian

issuer; not an investment

company; if a majority owned

subsidiary, parent

corporation must also be a

small business issuer.

Securities & Exchange Commission Small business issuer- 17 CFR 240.12b-2

Registration and Reporting. revenues less than $25

million; US or Canadian

issuer; not an investment

company; if a majority owned

subsidiary, parent

corporation must also be a

small business issuer.

Selective Service, Placement of 500 employees................ 50 App. USC 468(a)

Orders.

Federal Communications Commission, $40 million in average annual 47 CFR 24.720(b)(1)

Licensing of Broadband Personal gross revenues.

Communications Services.

Federal Communications Commission, $40 million in average annual 47 CFR 24.320(b)

Licensing of Narrowband Personal gross revenues and $40

Communications Services. million in personal net

worth.

Federal Communications Commission, $40 million in average annual 47 CFR 21.961(b)

Licensing of Multipoint Distribution gross revenues.

Services (Wireless Cable).

Federal Communications Commission, Small cable systems of 15,000 47 CFR 76.901(c)

Regulatory Relief for Small Cable or fewer subscribers owned

Entities. by cable companies with

400,000 or fewer subscribers.

Nuclear Regulatory Commission, $5 million in average annual 10 CFR 2.810

Regulatory Flexibility Analyses. gross revenues for concerns

providing services and 500

employees for manufacturing

concerns.

Department of the Treasury, Office of $1 million in average annual 12 CFR 25.22(b)(3)

the Comptroller of the Currency, gross revenues.

Community Reinvestment Act.

Department of the Treasury, Office of $1 million in average annual 12 CFR 563e.22(b)(3)(iii)

Thrift Supervision, Community gross revenues.

Reinvestment Act.

Board of Governors of the Federal $1 million in average annual 12 CFR 228.22(b)(3)(ii)

Reserve System, Community gross revenues.

Reinvestment Act.

[[Page 57991]]

Federal Deposit Insurance $1 million in average annual 12 CFR 345.22(b)(3)(ii)

Corporation, Community Reinvestment gross revenues.

Act.

Department of Agriculture, Commodity SBA size standards........... 7 CFR 1485.11(oo)

Credit Corporation, Market Promotion

Program.

----------------------------------------------------------------------------------------------------------------

Note for Airport Concessionaire Size Standards

Following is a list of the maximum average annual gross receipts in

the preceding 3 years (in millions of dollars):

------------------------------------------------------------------------

Concession Amount

------------------------------------------------------------------------

Food and beverage............................................. 30.00

Book stores................................................... 30.00

Auto rental................................................... 40.00

Banks......................................................... \1\100.0

0

Hotels and motels............................................. 30.00

Insurance machines and counters............................... 30.00

Gift, novelty, and souvenir shop.............................. 30.00

Newsstands.................................................... 30.00

Shoe shine stands............................................. 30.00

Barber shops.................................................. 30.00

Automobile parking............................................ 30.00

Jewelry stores................................................ 30.00

Liquor stores................................................. 30.00

Travel agencies............................................... 30.00

Drug stores................................................... 30.00

Pastries and baked goods...................................... 30.00

Luggage cart rental........................................... 30.00

Coin-operated T.V.'s.......................................... 30.00

Game rooms.................................................... 30.00

Luggage and leather goods stores.............................. 30.00

Candy, nut, and confectionery stores.......................... 30.00

Toy stores.................................................... 30.00

Beauty shops.................................................. 30.00

Vending machines.............................................. 30.00

Coin-operated lockers......................................... 30.00

Florists...................................................... 30.00

Advertising................................................... 30.00

Taxicab....................................................... 30.00

Limousines.................................................... 30.00

Duty free shops............................................... 30.00

Pay telephones................................................ \2\ 1,50

0

Gambling machines............................................. 30.00

Other concessions not shown above............................. 30.00

------------------------------------------------------------------------

\1\ As measured by total assets.

\2\ Number of employees.

SBA will briefly describe and respond to the comments received in

response to its initial proposed rule regarding alternate size

standards of other agencies. Several of the commenters, although

supportive of the proposed rule, identified the following issues that

they felt warranted further clarification or modification to the

proposed procedures. These issues are identified below along with the

SBA's response.

Definition and Calculation of Average Annual Receipts and Number of

Employees: The commenters raised two questions concerning annual

average receipts and number of employees--how are these terms defined

and how are they calculated? As specified in revised Sec. 121.901, the

SBA utilizes its rules, standards and procedures when making size

determinations for other agencies. For clarification on the definition

and calculation of size standard measures, Sec. 121.902(b)(1)(ii)(D) of

this part has been added to incorporate, by reference, the SBA's

criteria for defining and calculating gross receipts and number of

employees. The SBA's policy of applying the criteria specified in this

regulation to another agency's size standard does not preclude a

department or agency from requesting a change to the definition of

procedures regarding its size standard. Such request would be part of

the SBA's review of the proposed size standard.

Size Standard Measures: Two commenters suggested that these

regulations should permit the use of size standard measures other than

gross receipts and number of employees, such as net worth, and permit

the use of number of employees for non-manufacturing industries. For

non-SBA size standards, the law clearly requires that the size standard

for manufacturing concerns be established based on number of employees,

and for concerns providing services that the size standards be

established based on gross receipts. SBA believes that the statutory

changes pursuant to Sec. 301 of Public Law 103-403 permit an agency to

request establishment of a size standard for all other types of

concerns (e.g., agriculture, construction, retail trade) based on gross

receipts, number of employees or another quantitative measure of size

suitable for the purpose and industry under consideration, and this

final rule allows a department or agency to make such a request.

Application of Size Standards to Programs: The comments reviewed

reflected confusion about the application of non-SBA size standards to

Federal government programs. Several commenters indicated that they

were unsure if non-SBA size standards were only to be used within a

specific department or agency, even though a program may be implemented

across several agencies or departments. Second, some commenters

appeared to be under the misunderstanding that individual agencies

would be able to establish their own size standards for use in SBA

programs within their agency.

These regulations allow departments and agencies to prescribe

unique size standards only for programs under their responsibility. For

example, this means that size standards established by the Department

of Transportation for a program under its control are applicable to all

departments or agencies that must also implement such a program.

Similarly, the SBA size standards are applicable to all programs under

the SBA area of cognizance, regardless of where implemented. This means

that the SBA size standards must be used by all departments and

agencies for the Small Business Set-Aside and MED Programs.

In another case, a statute may require the use of SBA's size

standards or refer to small business as defined under the Small

Business Act. An example is the Department of Defense's Small

Disadvantaged Business Program. In those cases, the SBA size standards

clearly must be used. However, if use of SBA's size standards has not

been statutorily required, a Federal department or agency is free to

either use the SBA's size standards or endeavor to obtain the approval

of SBA to establish a different size standard.

Size Determinations and Appeals to Non-SBA Size Standards: A

commenter raised the question of how size determinations and appeals

would be made for non-SBA size standards in cases involving a dispute

over the size status of a business concern. When requested, the SBA

will provide size determinations for other Federal government agencies,

even in cases where size standards are established by statute or the

SBA has approved size standards different from its own size standards

(See proposed Sec. 121.1001(b)(6)). The SBA also provides a

discretionary appeal process from such size determinations that would

be available to other Federal agencies. The procedures regarding size

appeals are contained in part 134 (See proposed Sec. 121.1102).

Documentation for SBA Review of Non-SBA Size Standards: A commenter

requested clarification on what

[[Page 57992]]

documentation must accompany its requests for approval of non-SBA size

standards, particularly regarding submission of copies of comments

received on the proposed rule. In order for the SBA to properly

evaluate requests to issue proposed rules, an agency proposing a size

standard shall provide the SBA with (1) the reasons for proposing a

size standard different from the SBA's size standard, and (2) industry

related data or other data supporting its proposed size standard. In

order to properly evaluate each request for non-SBA size standards and

approve the issuance of a final rule, the SBA shall also be provided

with copies of all comments that relate to the establishment of the

size standard, not just copies of all comments received on the proposed

rule. The SBA has modified a provision of the proposed rule to specify

that only comments related to the size standard need to be provided to

the SBA as part of its review of an agency final rule.

Another commenter recommended modifying the requirement to provide

the SBA with a copy of the final rule prior to approval by the SBA's

Administrator. To expedite the SBA's review of the size standard at

this stage of the rulemaking process, the commenter recommended that

agencies be allowed to submit the intended size standard with an

accompanying justification. The SBA agrees, and has modified this

provision of the proposed rule. When possible, the requesting agency

should submit a draft final rule and preamble. However, correspondence

containing a justification for the intended size standard is

acceptable, provided the agency furnishes the SBA a copy of the final

rule and its preamble before submitting it for publication in the

Federal Register.

Clarify ``Other Factors'' Considered by the SBA Administrator:

Several commenters requested clarification on the information the SBA

believes it should review when complying with the requirement to

``consider other factors the Administrator deems to be relevant.'' When

establishing or approving size standards, the SBA Administrator is

required to ensure that size standards vary by industry to the extent

necessary to reflect industry differences and to consider other

relevant factors. The SBA generally evaluates the structural

characteristics of an industry to determine the appropriate differences

between industry size standards. These characteristics include, but are

not limited to: average firm size, industry competition, the extent of

industry dominance by large firms, the distribution of sales and

employees by firm size, and start-up costs. Other relevant factors

generally pertain to all other types of information that could

influence the decision on the size standard. Although this may vary for

each request, several important factors would include the goals and

objectives of the program, the impact of the size standard on small

businesses, conventional industry business practices, and the

administration and application of size standard requirements.

Timeliness of SBA Decisions on Approval Process: Several commenters

were concerned about the timeliness of the SBA approval process and

what impact it might have on rulemaking. The SBA shares this concern

and will make every effort to ensure that the regulatory process is not

delayed. However, the SBA believes specifying a time frame for these

reviews is impractical. Each request will likely have different

implications. That makes estimating within this rule a definite

completion date for a review inappropriate. The SBA will, as a matter

of policy, respond to requests for non-SBA size standards within 30

days. Where the SBA cannot respond within 30 days, the agency will

advise the requester as soon as possible.

SBA Reviews and Legislation Providing Authority to Establish Size

Standard: One comment questioned the need for an agency to request the

SBA's approval for a non-SBA size standard if the enabling legislation

for a particular program specifically authorized the agency to

establish a size standard without specifying a size standard.

The SBA believes that if the enabling legislation does not

designate the size standard, the department or agency would be required

to follow the approval procedures specified in the Small Business Act

and these regulations. Only in instances in which legislation

specifically establishes a size standard would an agency or department

be exempted from these procedures.

Section 121.1504 would be redesignated as Sec. 121.903, and

reworded in plain English.

Section 121.1601 would be redesignated as Sec. 121.1001 and

reworded for clarity. The section would be revised to reflect the new

names of offices under SBA's reorganization. References to the Agency's

regional offices would be changed to the offices of SBA Government

Contracting Area Director or SBA District Director, as appropriate.

Reference to any inactive assistance program would be deleted. In

addition, proposed Sec. 121.1001(b)(1)(iv) would be amended by

expanding the first sentence to clarify existing policy. The

regulations currently state that a large business may initiate a size

protest as an interested party if only one offer was received. This

change would clarify that this does not include a concern that is found

to be other than small for a particular procurement protesting the size

of the only remaining offeror.

Proposed Sec. 121.1001(b)(5) (present Sec. 121.1601(a)(5)) would be

amended to clarify that SBA will make size determinations when a

procurement is unrestricted, and that the Office of Hearings and

Appeals (OHA) will issue decisions on size appeals and Standard

Industrial Classification (SIC) code appeals on unrestricted

procurements. This change is necessary because OHA has issued decisions

in the past that the SBA regional offices have no jurisdiction to make

size determinations when a procurement is unrestricted, and that OHA

has no jurisdiction over size appeals or SIC Code appeals when a

procurement is unrestricted. SBA disagrees with OHA's interpretation of

the existing regulations, and therefore proposes to clarify the

regulations. OHA has said that small business status is beneficial only

for small business set-aside contracts. This is not true. Small

business status is beneficial in unrestricted procurements as well for

the following reasons, among others:

1. Small Businesses receive the contract award in the case of a tie

bid with a large business.

2. Small businesses are eligible to apply for a Certificate of

Competency when a contracting officer makes a determination of non-

responsibility.

3. Small businesses are exempt from the Cost Accounting Standards.

4. Small businesses may receive accelerated progress payments.

5. Small businesses are exempt from submitting subcontracting

plans.

In the January 1, 1990, revision to 13 CFR Part 121, SBA attempted to

clarify this issue by providing the example of the tie bids and the

Certificate of Competency eligibility. It was not SBA's intention to

limit size determinations and size appeals to just those two examples

when a procurement is unrestricted. However, after publication of the

revised regulations, OHA ruled that it would not make a decision on a

size determination appeal unless there were tie bids or the contracting

officer made a determination of non-responsibility. There are many

benefits to being a small business in unrestricted procurements. It is

SBA's policy to make size determinations when a

[[Page 57993]]

protest is received on any unrestricted procurement, regardless of

whether there is an apparent benefit at the time the protest is

received. Additionally, SBA is attempting to clarify that OHA has

jurisdiction to issue decisions concerning SIC appeals on unrestricted

procurements. Currently, a concern has no recourse when a contracting

officer issues an unrestricted solicitation with an incorrect SIC Code.

The revised Sec. 121.1001 would be further amended to use the term

``headquarters'' in lieu of the term ``principal office'' in referring

to a concern's primary headquarters. SBA believes the term

``headquarters'' more accurately describes the location where a firm's

business or corporate records are maintained and business decisions are

made.

Section 121.1602 would be redesignated as Sec. 121.1002, rewritten

for clarity, and amended to provide for changes in offices responsible

for making formal size determinations as a result of the Agency's

reorganization. The Government Contracting Area Director would assume

the responsibilities formerly held by SBA regional administrators for

making size determinations. The term ``headquarters'' would be used

instead of ``principal offices'' when describing the primary location

of a concern's executive office.

Section 121.1603 would be broken out into proposed Secs. 121.1003

through 121.1006 for ease of use and clarity. Individual sections would

be created relating to where a protest should be filed, what time

limits apply to size protests, how a protest must be filed with the

contracting officer, and referral of a size protest to the appropriate

SBA Government Contracting Area Office.

Proposed Sec. 121.1004 would clarify that although a protest filed

by a contracting officer is timely whether filed before or after award,

such a protest will be dismissed by SBA as premature if filed before

the selection of the apparent successful offeror. This change would

prohibit a contracting officer from protesting the size of several

concerns at once (e.g., all firms found to be in the competitive range)

and would authorize a protest only after the apparent successful

offeror has been selected.

Section 121.1604(a) and (b) would be redesignated as

Sec. 121.1007(b) and (c), reworded for clarity, and the examples

deleted. A portion of present Sec. 121.1601(a)(1)(iv) would be added to

proposed Sec. 121.1007 as subsection (a) for the purpose of clarifying

that a protest not pertaining to a particular procurement or sale would

not be acted upon by SBA. Subsection (c) which pertains to appeals of

dismissals would be eliminated as unnecessary in this section

addressing size determinations.

Section 121.1605 would be redesignated as Sec. 121.1008 and would

be reworded for clarity and user ease. In addition, the revised

Sec. 121.1008(a) would be amended to allow any overnight mail delivery

service that provides proof of receipt to be used in the size

determination process. This change is necessary in order that size

determinations may be made in a timely manner.

Section 121.1606 would be redesignated as Sec. 121.1009. Its

provisions would be reworded for clarity. The revision would permit use

of any overnight mail delivery service that provides proof of receipt

to be used in the size determination process. The change would assist

SBA in making size determinations in a timely manner. Paragraph (g)(3)

would be further amended to provide that a concern which had self

certified as small on a pending procurement or assistance application

would have to provide notice of any adverse size determination to

officials responsible for the pending procurement or assistance

request. Subsection (h) would be added to permit the SBA office that

performed a formal size determination to reopen that determination in

the limited instance where the size determination contains clear

administrative error or a clear mistake of fact, provided that no

appeal has been taken to OHA and that no contract has been awarded.

This provision would permit SBA to correct the error or mistake without

requiring the filing of an appeal at OHA.

Section 121.1607 would be redesignated as Sec. 121.1010. The

proposed provision would be reworded for ease of use and clarity.

Section 121.1701 would be amended and the substance of subsections

(a) and (b) redesignated as Sec. 121.1101 and Sec. 121.1103,

respectively. Proposed Sec. 121.1101 would materially alter the right

of a party adversely affected by a size determination to appeal the

adverse determination to OHA and further provide that OHA has the

unfettered discretion to select and review formal size determinations.

There would no longer be a right to appeal a size determination. SBA

believes that this amended procedure will simplify and speed the final

consideration of size status issues. Unless a petition for review is

accepted by OHA, the size determinations made by Government Contracting

offices and disaster area offices would be final Agency decisions and

would end the size determination process. Under the revised procedures,

the procurement process generally would not be delayed because of size

determination appeals to OHA. OHA could elect to consider any size

determination appeal request.

Section 121.1702 has been eliminated. Part of proposed

Sec. 121.1101 simply references procedures for discretionary OHA

reviews as contained in part 134.

Section 121.1703(a) would be incorporated into Sec. 121.1101.

Sections 121.1703 (b) and (c) would be incorporated into

Secs. 121.1103, and 121.1703(d) would be eliminated.

Section 121.1704 would be incorporated into Sec. 121.1103. The

revised section would address procedures for appealing SIC code

designations. The revision would provide that appeal procedures would

be those outlined in FAR 19-303.

Sections 121.1705 through 121.1722 would be eliminated and their

substance transferred to part 134.

Sections 121.2001 through 121.2005 would be redesignated as

Secs. 121.1201 through 121.1206. The sections would be revised to

reflect better clarity and organizational content. The substance of

these provisions would remain substantially unaffected. Minor editorial

changes would be made, for example, to eliminate outdated information

such as procurement funding levels for prior years. The content of the

current Sec. 121.2004 would be rearranged in a more logical sequence.

Where organizational titles have changed, the revisions would adopt the

new titles.

Sections 121.2101 through 121.2104 would be redesignated as

Secs. 121.1301-121.1304, respectively, Sec. 121.2105 would be

incorporated into proposed Sec. 121.1304, and Sec. 121.2106 would be

redesignated as Sec. 121.1305. Minor editorial changes pertaining to

class waivers would be made for ease of reading and use.

In addition, SBA is proposing to incorporate in these sections

procedural rules pertaining to individual waivers of the

Nonmanufacturer Rule for specific solicitations. On November 15, 1988,

the enactment of Public Law 100-656 incorporated into the Small

Business Act the previously existing SBA requirement that recipients of

small business set-asides or SBA 8(a) subcontracts for manufactured

products that are not the actual manufacturers (nonmanufacturers) be

themselves small business regular dealers. This legislation specifies

that regular dealers may provide only the product of domestic small

business manufacturers or processors on small business set-asides and

8(a) procurements. This requirement is commonly known as the

[[Page 57994]]

Nonmanufacturer Rule. Section 303(h) of Public Law 100-656 authorized

the Administrator of the SBA to grant a waiver of the Nonmanufacturer

Rule for a product or class of products for which there are no small

business manufacturers or processors in the Federal market. The

requirement that a small business supplier provide a product

manufactured or processed by a small business concern in the U.S. under

a contract set-aside for small business or under an SBA 8(a)

subcontract is found in SBA regulations at Secs. 121.406(b). On June

15, 1989, Public Law 101-37 renumbered the elements in the

Nonmanufacturer Rule and added the requirement that a small business

concern must meet the numerical size standard for the Standard

Industrial Classification code assigned to the contract solicitation on

which the offer is being made. Further, on November 15, 1990, Public

Law 101-574 modified the wording of the waiver provision. The new

wording allowed the Administrator of the SBA to waive the requirement

for any product or class of products for which there is no small

business manufacturer or processor ``available to participate in the

Federal procurement market.'' The law also added a provision which

allows the Administrator to waive the requirements of the

Nonmanufacturer Rule after receiving a determination by the contracting

officer stating that no small business manufacturer or processor can

reasonably be expected to offer a product meeting the specification,

including period of performance, required of an offeror on a

solicitation.

On September 21, 1993, SBA published in the Federal Register

proposed procedural rules for individual waivers of the Nonmanufacturer

Rule. SBA received two sets of comments in response to the proposed

rule. Due to the passage of time since the proposed rule was originally

published, SBA is not issuing final regulations pertaining to

individual waivers but is again proposing revised regulations taking

into account the comments received. The first commenter was the United

States Department of the Interior, Geological Survey (DOI). Its first

comment was a request to include in the regulations a definition of

``nonmanufacturing.'' Since this term is not used in the proposed

regulations, a definition is unnecessary.

DOI's second comment was a request to clarify the language of the

regulation by shortening word and sentence lengths. SBA reviewed the

regulation and, where possible, reduced the length of the sentences and

the size of the words.

The second commenter was a small business wholesaler who submitted

four comments. The first comment was that SBA should review and grant

class waivers for individual items. The statute authorizing waivers

does permit class waivers for products for which there are no small

business manufacturers available to participate in the Federal

procurement market and current SBA regulations already address this.

Consequently, no action on the comment is necessary.

The small business wholesaler's second comment was that a SBA

Business Opportunity Specialist should be allowed to request waivers

for individual procurements. Waivers for individual procurements are

routinely granted for both small business set-asides and SBA 8(a)

subcontracts. SBA believes that the best procedure to maintain

administrative consistency is to allow only the procuring agencies'

contracting officers to request individual waivers for both set-asides

and 8(a) awards. We believe that the procuring agency contracting

officer ultimately responsible for contract award is the most qualified

individual to determine whether small business products are available

and/or meet the specifications of a particular solicitation.

The small business wholesaler's third comment was that SBA state

procurement center representatives should be allowed to request

individual waivers of the Nonmanufacturer Rule. Public Law 101-574,

Section 210, is explicit in its language allowing only contracting

officers to request individual waivers. Therefore, SBA has no authority

to allow anyone other than contracting officers to request individual

waivers of the Nonmanufacturer Rule.

The fourth comment by the small business wholesaler was that SBA

8(a) subcontractors should be allowed to request individual waivers of

the Nonmanufacturer Rule. As with the commenter's third comment, Public

Law 101-574, Section 210, is explicit in its language allowing only

contracting officers to request individual waivers.

Compliance With Executive Orders 12612, 12778, and 12866, the

Regulatory Flexibility Act (5 U.S.C. 601, et seq.), and the Paperwork

Reduction Act (44 U.S.C. Ch. 35)

SBA certifies that this proposed rule would not be considered a

significant rule within the meaning of Executive Order 12866 and would

not have a significant economic impact on a substantial number of small

entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C.

601, et seq. This rule is would clarify SBA's procedural and

definitional size rules, but would not change the size standard for any

particular industry. As such, size eligibility for the various SBA

programs should not be affected by this proposal. The rule would have

no effect on the amount or dollar value of any Federal contract

requirements or of any financial assistance provided through SBA.

Therefore, it is not likely to have an annual economic effect of $100

million or more, result in a major increase in costs or prices, or have

a significant adverse effect on competition or the United States

economy.

For purposes of the Paperwork Reduction Act, 44 U.S.C. Ch. 35, SBA

certifies that this proposed rule, if adopted in final form, would

contain no new reporting or recordkeeping requirements.

For purposes of Executive Order 12612, SBA certifies that this rule

would not have any federalism implications warranting the preparation

of a Federalism Assessment.

For purposes of Executive Order 12778, SBA certifies that this rule

is drafted, to the extent practicable, in accordance with the standards

set forth in Section 2 of that Order.

List of Subjects in 13 CFR Part 121

Government procurement, Government property, Grant programs--

business, Individuals with disabilities, Loan programs--business,

Reporting and recordkeeping requirements, Small businesses.

Accordingly, pursuant to the authority set forth in sections 3(a)

and 5(b)(6) of the Small Business Act, 15 U.S.C. 632(a) and 634(b)(6),

SBA hereby proposes to revise part 121 of Title 13, Code of Federal

Regulations (CFR), to read as follows:

PART 121--SMALL BUSINESS SIZE REGULATIONS

Subpart A--Size Eligibility Provisions and Standards

Provisions of General Applicability

Sec.

121.101 What are SBA size standards?

121.102 How does SBA establish size standards?

121.103 What is affiliation?

121.104 How does SBA calculate annual receipts?

121.105 How does SBA define ``business concern or concern''?

121.106 How does SBA calculate number of employees?

121.107 How does SBA determine a concern's ``primary industry''?

[[Page 57995]]

121.108 What are the penalties for misrepresentation of size

status?

Size Standards Used To Define Small Business Concerns

6121.201 What size standards has SBA identified by Standard Industrial

Classification codes?

Size Eligibility Requirements for SBA Financial Assistance

6121.301 What size standards are applicable to financial assistance

programs?

6121.302 When does SBA determine the size status of an applicant?

6121.303 What size procedures are used by SBA before it makes a formal

size determination?

6121.304 What are the size requirements for refinancing an existing

SBA loan?

6121.305 What size eligibility requirements exist for obtaining

business loans relating to particular procurements?

Size Eligibility Requirements for Government Procurement

6121.401 What procurement programs are subject to size determinations?

6121.402 What size standards are applicable to procurement assistance

programs?

6121.403 Are SBA size determinations and SIC code designations binding

on parties?

6121.404 When does SBA determine the size status of a business

concern?

6121.405 May a business concern self-certify its small business size

status?

6121.406 How does a small business concern qualify to provide

manufactured products under small business set-aside or MED

procurements?

6121.407 What are the size procedures for multiple item procurements?

6121.408 What are the size procedures for SBA's Certificate of

Competency Program?

6121.409 What size standard applies in an unrestricted procurement for

Certificate of Competency purposes?

6121.410 What are the size standards for SBA's Section 8(d)

Subcontracting Program?

6121.411 What are the size procedures for SBA's Section 8(d)

Subcontracting Program?

6121.412 What are the size procedures for partial small business set-

asides?

Size Eligibility Requirements for Sales or Lease Of Government Property

6121.501 What programs for sales or leases of Government property are

subject to size determinations?

6121.502 What size standards are applicable to programs for sales or

leases of Government property?

6121.503 Are SBA size determinations binding on parties?

6121.504 When does SBA determine the size status of a business

concern?

6121.505 What is the effect of a self-certification?

6121.506 What definitions are important for sales or leases of

Government-owned timber?

6121.507 What are the size standards and other requirements for the

purchase of Government-owned timber (other than Special Salvage

timber)?

6121.508 What are the size standards and other requirements for the

purchase of Government-owned Special Salvage Timber?

6121.509 What is the size standard for leasing of Government land for

coal mining?

6121.510 What is the size standard for leasing of Government land for

uranium mining?

6121.511 What is the size standard for buying Government-owned

petroleum?

6121.512 What is the size standard for stockpile purchases?

Size Eligibility Requirements for the Minority Enterprise Development

(MED) Program

6121.601 What is a small business for purposes of admission to SBA's

Minority Enterprise Development (MED) Program?

6121.602 At what point in time must a MED applicant be small?

6121.603 How does SBA determine whether a Participant is small for a

particular MED subcontract?

6121.604 Are MED Participants considered small for purposes of other

SBA assistance?

Size Eligibility Requirements for the Small Business Innovation

Research (SBIR) Program

6121.701 What SBIR programs are subject to size determinations?

6121.702 What size standards are applicable to SBIR programs?

6121.703 Are formal size determinations binding on parties?

6121.704 When does SBA determine the size status of a business

concern?

6121.705 Must a business concern self-certify its size status?

Size Eligibility Requirements for Paying Reduced Patent Fees

6121.801 May patent fees be reduced if a concern is small?

6121.802 What size standards are applicable to reduced patent fees

program?

121.803 Are formal size determinations binding on parties?

121.804 When does SBA determine the size status of a business

concern?

121.805 May a business concern self-certify its size status?

Size Eligibility Requirements for Compliance With Programs of Other

Agencies

121.901 Can other Government agencies obtain SBA size

determinations?

121.902 What size standards are applicable to programs of other

agencies?

121.903 When does SBA determine the size status of a business

concern?

Procedures for Size Protests and Requests for Formal Size

Determinations

121.1001 Who may initiate a size protest or a request for formal

size determination?

121.1002 Who makes a formal size determination?

121.1003 Where should a size protest be filed?

121.1004 What time limits apply to size protests?

121.1005 How must a protest be filed with the contracting officer?

121.1006 When will a size protest be referred to an SBA Government

Contracting Area Office?

121.1007 Must a protest of size status relate to a particular

procurement and be specific?

121.1008 What happens after SBA receives a protest or a request for

a formal size determination?

121.1009 What are the procedures for making the size determination?

121.1010 How does a concern become recertified as a small business?

Appeals of Size Determinations and SIC Code Designations

121.1101 Are formal size determinations subject to appeal?

121.1102 Are SIC code designations subject to appeal?

121.1103 What are the procedures for appealing a SIC code

designation?

121.1104 What are the time limits for appeals?

Subpart B--Other Eligibility Provisions

Eligibility of Organizations for the Handicapped for Small Business

Set-asides

121.1201 May handicapped organizations be awarded Federal

procurements set aside for small business?

121.1202 What is an organization for the handicapped?

121.1203 Who are handicapped individuals?

121.1204 What are the eligibility requirements for organizations

for the handicapped to receive awards of contracts set aside for

small business?

121.1205 What are the procedures for filing protests of the status

of handicapped organizations?

121.1206 How does SBA handle appeals of economic impact?

Waivers of the Nonmanufacturer Rule for Classes of Products

121.1301 What is the Nonmanufacturer Rule?

121.1302 When will a waiver of the Nonmanufacturer Rule be granted

for a class of products?

121.1303 When will a waiver of the Nonmanufacturer Rule be granted

for an individual contract?

[[Page 57996]]

121.1304 What are the procedures for requesting and granting

waivers?

121.1305 How is a list of previously granted class waivers

obtained?

Authority: 15 U.S.C. 632(a), 634(b)(6), 637(a) and 644(c); and

Pub. L. 102-486, 106 Stat. 2776, 3133.

Provisions of General Applicability

Sec. 121.101 What are SBA size standards?

SBA's size standards define whether a business entity is small and,

thus, eligible for Government programs and preferences reserved for

``small business'' concerns. Size standards have been established for

types of economic activity, or industry, generally under the Standard

Industrial Classification (SIC) System. The SIC System is described in

the ``Standard Industrial Classification Manual'' published by the

Office of Management and Budget, Executive Office of the President, and

sold by the U.S. Government Printing Office, Superintendent of

Documents, P.O. Box 371954, Pittsburgh, PA 15250-7954. The SIC System

assigns four-digit SIC codes to all economic activity within ten major

divisions. Section 121.201 describes the size standards now

established. A full table matching a size standard with each four-digit

SIC code is also published annually by SBA in the Federal Register.

Sec. 121.102 How does SBA establish size standards?

(a) SBA considers economic characteristics comprising the structure

of an industry, including degree of competition, average firm size,

start-up costs and entry barriers, and distribution of firms by size.

It also considers technological changes, competition from other

industries, growth trends, historical activity within an industry,

unique factors occurring in the industry which may distinguish small

firms from other firms, and the objectives of its programs and the

impact on those programs of different size standard levels.

(b) As part of its review of a size standard, SBA will investigate

if any concern at or below a particular standard would be dominant in

the industry. SBA will take into consideration market share of a

concern and other appropriate factors which may allow a concern to

exercise a major controlling influence on a national basis in which a

number of business concerns are engaged. Size standards seek to ensure

that a concern that meets a specific size standard is not dominant in

its field of operation.

(c) Please address any requests to change existing size standards

or establish new ones for emerging industries to the Assistant

Administrator for Size Standards, Small Business Administration, 409

3rd Street, S.W., Washington, D.C. 20416.

Sec. 121.103 What is affiliation?

(a) General Principles of Affiliation. (1) Concerns are affiliates

of each other when one concern controls or has the power to control the

other, or a third party or parties controls or has the power to control

both.

(2) SBA considers factors such as ownership, management, and

contractual relationships, in determining whether affiliation exists.

(3) Individuals or firms that have identical or substantially

identical business or economic interests, such as family members,

persons with common investments, or firms that are economically

dependent through contractual or other relationships, may be treated as

one party with such interests aggregated.

(4) SBA counts the receipts or employees of the concern whose size

is at issue and those of all its domestic and foreign affiliates,

regardless of whether the affiliates are organized for profit, in

determining the concern's size.

(b) Exclusion from affiliation coverage. (1) Business concerns

owned in whole or substantial part by investment companies licensed, or

development companies qualifying, under the Small Business Investment

Act of 1958, as amended, or by Investment Companies registered under

the Investment Company Act of 1940, as amended, are not considered

affiliates of such investment companies or development companies.

(2) Business concerns owned and controlled by Indian Tribes, Alaska

Regional or Village Corporations organized pursuant to the Alaska

Native Claims Settlement Act (43 U.S.C. 1601), Native Hawaiian

Organizations, or Community Development Corporations authorized by 42

U.S.C. 9805 are not considered affiliates of such entities, or with

other concerns owned by these entities solely because of their common

ownership.

(3) Business concerns which are part of a SBA approved pool of

concerns for a joint program of research and development as authorized

by the Small Business Act are not affiliates of one another because of

the pool.

(4) Business concerns which lease employees from concerns primarily

engaged in leasing employees to other businesses are not affiliated

with the leasing company solely on the basis of a leasing agreement.

(5) For financial, management, or technical assistance under the

Small Business Investment Company program, an applicant concern will

not be affiliated with the following investors, provided the investors

do not control the concern other than to the extent that would be

permitted under Sec. 107.865 of this chapter:

(i) Venture capital operating companies as defined in the U.S.

Department of Labor Regulations found at 29 CFR 2510.3-101(d);

(ii) Employee benefit or pension plans established and maintained

by the Federal government or by any state, their political

subdivisions, or any agency or instrumentality thereof for the benefit

of employees;

(iii) Employee benefit or pension plans within the meaning of the

Employee Retirement Income Security Act of 1974; or

(iv) Charitable trusts, foundations, endowments, or similar

organizations exempt from Federal income taxation under Section 501(c)

of the Internal Revenue Code of 1986.

(6) A protege firm is not an affiliate of a mentor firm solely

because the protege firm receives assistance from the mentor firm under

Federal Mentor-Protege programs.

(c) Affiliation based on stock ownership. (1) A person is an

affiliate of a concern if the person owns or controls, or has the power

to control 50 percent or more of its voting stock, or a block of stock

which affords control because it is large compared to other outstanding

blocks of stock.

(2) If two or more persons each owns, controls or has the power to

control less than 50 percent of the voting stock of a concern, with

minority holdings that are equal or approximately equal in size, but

the aggregate of these minority holdings is large as compared with any

other stock holding, each such person is presumed to be an affiliate of

the concern.

(d) Affiliation arising under stock options, convertible

debentures, and agreements to merge. Since stock options, convertible

debentures, and agreements to merge (including agreements in principle)

affect the power to control a concern, SBA treats them as though the

rights granted have been exercised (except that an affiliate cannot use

them to appear to terminate control over another concern before it

actually does so). SBA gives present effect to an agreement to merge or

sell stock whether such agreement is unconditional, conditional, or

finalized but unexecuted. Agreements to open or continue negotiations

towards the possibility of a merger or a sale of stock at some later

date are not considered

[[Page 57997]]

``agreements in principle'' and, thus, are not given present effect.

(e) Affiliation based on common management. Affiliation arises

where one or more officers, directors or general partners controls the

board of directors and/or the management of another concern.

(f) Affiliation based on joint venture arrangements. (1) Parties to

a joint venture are affiliates if any one of them seeks SBA financial

assistance for use in connection with the joint venture.

(2) Concerns bidding on a particular procurement or property sale

as joint venturers are affiliated with each other with regard to

performance of that contract.

(3) A contractor and subcontractor are treated as joint venturers

if the ostensible subcontractor will perform primary and vital

requirements of a contract or if the prime contractor is unusually

reliant upon the ostensible subcontractor. All requirements of the

contract are considered in reviewing such relationship, including

contract management, technical responsibilities, and the percentage of

subcontracted work.

(4) For size purposes, a concern must include in its revenues its

proportionate share of joint venture receipts.

(g) Affiliation based on franchise and license agreements. The

restraints imposed on a franchisee or licensee by its franchise or

license agreement relating to standardized quality, advertising,

accounting format and other similar provisions, generally will not be

considered in determining whether the franchisor or licensor is

affiliated with the franchisee or licensee provided the latter has the

right to profit from its efforts and bears the risk of loss

commensurate with ownership. Affiliation may arise, however, through

other means, such as common ownership, common management or excessive

restrictions upon the sale of the franchise interest.

Sec. 121.104 How does SBA calculate annual receipts?

(a) Definitions. In determining annual receipts of a concern:

(1) Receipts is defined as gross or total income, plus cost of

goods sold, as reported on a concern's Federal Income Tax return.

However, the term receipts excludes net capital gains or losses, taxes

collected for and remitted to a taxing authority if included in gross

or total income, proceeds from the transactions between a concern and

its domestic or foreign affiliates (if also excluded from gross or

total income on a consolidated return filed with the IRS), and amounts

collected for another by a travel agent, real estate agent, advertising

agent, or conference management service provider.

(2) Completed fiscal year means a taxable year including any short

period. Taxable year and short period have the meaning attributed to

them by the IRS.

(3) Unless otherwise defined in this section, all terms shall have

the meaning attributed to them by the IRS.

(b) Period of measurement. (1) Annual receipts of a concern which

has been in business for 3 or more completed fiscal years means the

receipts of the concern over its last 3 completed fiscal years divided

by three.

(2) Annual receipts of a concern which has been in business for

less than 3 complete fiscal years means the receipts for the period the

concern has been in business divided by the number of weeks in

business, multiplied by 52.

(3) Annual receipts of a concern which has been in business 3 or

more complete fiscal years but has a short year as one of those years

means the receipts for the short year and the two full fiscal years

divided by the number of weeks in the short year and the two full

fiscal years, multiplied by 52.

(c) Use of information other than the Federal tax return. Where

other information gives SBA reason to regard Federal Income Tax returns

as false, SBA may base its size determination on such other

information.

(d) Annual receipts of affiliates. (1) If a concern has acquired an

affiliate or been acquired as an affiliate during the applicable

averaging period or before small business self-certification, the

annual receipts in determining size status include the receipts of both

firms. Furthermore, this aggregation applies for the entire applicable

period used in computing size rather than only for the period after the

affiliation arose. Receipts are determined for the concern and its

affiliates in accordance with paragraph (b) of this section even though

this may result in different periods being used to calculate annual

receipts.

(2) The annual receipts of a former affiliate are not included as

annual receipts if affiliation ceased before the date used for

determining size. This exclusion of annual receipts of a former

affiliate applies during the entire period used in computing size,

rather than only for the period after which the affiliation ceased.

Sec. 121.105 How does SBA define ``business concern or concern''?

(a) A business concern eligible for assistance from SBA as a small

business is a business entity organized for profit, with a place of

business located in the United States, and which operates primarily

within the United States or which makes a significant contribution to

the U.S. economy through payment of taxes or use of American products,

materials or labor.

(b) A business concern may be in the legal form of an individual

proprietorship, partnership, limited liability company, corporation,

joint venture, association, trust or cooperative, except that where the

form is a joint venture there can be no more than 49 percent

participation by foreign business entities in the joint venture.

(c) A firm will not be treated as a separate business concern if a

substantial portion of its assets and/or liabilities are the same as

those of a predecessor entity. In such a case, the annual receipts and

employees of the predecessor will be taken into account in determining

size.

Sec. 121.106 How does SBA calculate number of employees?

(a) Employees counted in determining size include all individuals

employed on a full-time, part-time, temporary, or other basis. SBA will

consider the totality of the circumstances, including factors relevant

for tax purposes, in determining whether individuals are employees of

the concern in question.

(b) Where the size standard is number of employees, the method for

determining a concern's size includes the following principles:

(1) The average number of employees of the concern is used

(including the employees of its domestic and foreign affiliates) based

upon numbers of employees for each of the pay periods for the preceding

completed 12 calendar months.

(2) Part-time and temporary employees are counted the same as full-

time employees.

(3) If a concern has not been in business for 12 months, the

average number of employees is used for each of the pay periods during

which it has been in business.

(4) The treatment of employees of former affiliates or recently

acquired affiliates is the same as for size determinations using annual

receipts in Sec. 121.104(d).

Sec. 121.107 How does SBA determine a concern's ``primary industry''?

In determining the primary industry in which a concern or a concern

combined with its affiliates is engaged, SBA considers the distribution

of receipts, employees and costs of doing business among the different

industries in which business operations occurred for the most recently

completed fiscal

[[Page 57998]]

year. SBA may also consider other factors, such as the distribution of

patents, contract awards, and assets.

Sec. 121.108 What are the penalties for misrepresentation of size

status?

In addition to other laws which may be applicable, section 16(d) of

the Small Business Act, 15 U.S.C. 645(d), provides severe criminal

penalties for knowingly misrepresenting the small business size status

of a concern in connection with procurement programs. Section 16(a) of

the Act also provides, in part, for criminal penalties for knowingly

making false statements or misrepresentations to SBA for the purpose of

influencing in any way the actions of the Agency.

Size Standards Used to Define Small Business Concerns

Sec. 121.201 What size standards has SBA identified by Standard

Industrial Classification codes?

The size standards described in this section apply to all SBA

programs unless otherwise specified. The number of employees or annual

receipts indicates the maximum allowed for a concern and its affiliates

to be considered small. The following is a listing of size standards

for industries under the SIC System. Size standards are listed by

Division and apply to all industries in that Division except those

specifically listed with separate size standards.

Size Standards by SIC Industry

------------------------------------------------------------------------

Size standards in

SIC code and description number of employees or

millions of dollars

------------------------------------------------------------------------

DIVISION A--AGRICULTURE

------------------------------------------------------------------------

MAJOR GROUP 01--AGRICULTURAL PRODUCTION-CROPS.. 0.5

MAJOR GROUPS 02--LIVESTOCK AND ANIMAL 0.5

SPECIALTIES.

EXCEPT:

0211 Beef Cattle Feedlots (Custom)........ 1.5

0252 Chicken Eggs......................... 9.0

MAJOR GROUP 07--AGRICULTURAL SERVICES.......... 5.0

MAJOR GROUP 08--FORESTRY....................... 5.0

MAJOR GROUP 09--FISHING, HUNTING, AND TRAPPING. 3.0

DIVISION B--MINING

------------------------------------------------------------------------

MAJOR GROUP 10--METAL MINING................... 500

MAJOR GROUP 12--COAL MINING.................... 500

MAJOR GROUP 13--OIL AND GAS EXTRACTION AND 500

MAJOR GROUP 14--MINING AND QUARRYING OF

NONMETALLIC MINERALS, EXCEPT FUELS.

EXCEPT:

1081 Metal Mining Services................ 5.0

1241 Coal Mining Services................. 5.0

1382 Oil and Gas Field Exploration 5.0

Services.

1389 Oil and Gas Field Services, N.E.C.... 5.0

DIVISION C--CONSTRUCTION

------------------------------------------------------------------------

MAJOR GROUP 15--GENERAL BUILDING CONTRACTORS... 17.0

MAJOR GROUP 16--HEAVY CONSTRUCTION, NON 17.0

BUILDING.

EXCEPT:

1629 (Part) Dredging and Surface Cleanup 13.5 \1\

Activities.

MAJOR GROUP 17--CONSTRUCTION--SPECIAL TRADE 7.0

CONTRACTORS.

DIVISION D--MANUFACTURING \2\.................. 500

EXCEPT:

2032 Canned Specialties................... 1,000

2033 Canned Fruits, Vegetables, Preserves, 500 \3\

Jams and Jellies.

2043 Cereal Breakfast Foods............... 1,000

2046 Wet Corn Milling..................... 750

2052 Cookies and Crackers................. 750

2062 Cane Sugar Refining.................. 750

2063 Beet Sugar........................... 750

2076 Vegetable Oil Mills, Except Corn, 1,000

Cottonseed, and Soybean.

2079 Shortening, Table Oils, Margarine, 750

and Other Edible Fats and Oils, N.E.C.

2085 Distilled and Blended Liquors........ 750

2111 Cigarettes........................... 1,000

2211 Broadwoven Fabric Mills, Cotton...... 1,000

2261 Finishers of Broadwoven Fabrics of 1,000

Cotton.

2295 Coated Fabrics, Not Rubberized....... 1,000

2296 Tire Cord and Fabrics................ 1,000

2611 Pulp Mills........................... 750

2621 Paper Mills.......................... 750

2631 Paperboard Mills..................... 750

2656 Sanitary Food Containers, Except 750

Folding.

2657 Folding Paperboard Boxes, Including 750

Sanitary.

[[Page 57999]]

2812 Alkalies and Chlorine................ 1,000

2813 Industrial Gases..................... 1,000

2816 Inorganic Pigments................... 1,000

2819 Industrial Inorganic Chemicals, N.E.C 1,000

2821 Plastics Materials, Synthetic Resins, 750

and Nonvulcanizable Elastomers.

2822 Synthetic Rubber (Vulcanizable 1,000

Elastomers).

2823 Cellulosic Manmade Fibers............ 1,000

2824 Manmade Organic Fibers, Except 1,000

Cellulosic.

2833 Medicinal Chemicals and Botanical 750

Products.

2834 Pharmaceutical Preparations.......... 750

2841 Soap and Other Detergents, Except 750

Specialty Cleaners.

2865 Cyclic Organic Crudes and 750

Intermediates, and Organic Dyes and

Pigments.

2869 Industrial Organic Chemicals, N.E.C.. 1,000

2873 Nitrogenous Fertilizers.............. 1,000

2892 Explosives........................... 750

2911 Petroleum Refining................... 1,500 \4\

2952 Asphalt Felts and Coatings........... 750

3011 Tires and Inner Tubes................ 1,000 \5\

3021 Rubber and Plastics Footwear......... 1,000

3211 Flat Glass........................... 1,000

3221 Glass Containers..................... 750

3229 Pressed and Blown Glass and 750

Glassware, N.E.C.

3241 Cement, Hydraulic.................... 750

3261 Vitreous China Plumbing Fixtures and 750

China and Earthenware Fittings and

Bathroom Accessories.

3275 Gypsum Products...................... 1,000

3292 Asbestos Products.................... 750

3296 Mineral Wool......................... 750

3297 Nonclay Refractories................. 750

3312 Steel Works, Blast Furnaces 1,000

(Including Coke Ovens), and Rolling Mills.

3313 Electrometallurgical Products, Except 750

Steel.

3315 Steel Wiredrawing and Steel Nails and 1,000

Spikes.

3316 Cold-Rolled Steel Sheet, Strip, and 1,000

Bars.

3317 Steel Pipe and Tubes................. 1,000

3331 Primary Smelting and Refining of 1,000

Copper.

3334 Primary Production of Aluminum....... 1,000

3339 Primary Smelting and Refining of 750

Nonferrous Metals, Except Copper and

Aluminum.

3351 Rolling, Drawing, and Extruding of 750

Copper.

3353 Aluminum Sheet, Plate, and Foil...... 750

3354 Aluminum Extruded Products........... 750

3355 Aluminum Rolling and Drawing, N.E.C.. 750

3356 Rolling, Drawing, and Extruding of 750

Nonferrous Metals, Except Copper and

Aluminum.

3357 Drawing and Insulating of Nonferrous 1,000

Wire.

3398 Metal Heat Treating.................. 750

3399 Primary Metal Products, N.E.C........ 750

3411 Metal Cans........................... 1,000

3431 Enameled Iron and Metal Sanitary Ware 750

3482 Small Arms Ammunition................ 1,000

3483 Ammunition, Except for Small Arms.... 1,500

3484 Small Arms........................... 1,000

3511 Steam, Gas, and Hydraulic Turbines, 1,000

and Turbine Generator Set Units.

3519 Internal Combustion Engines, N.E.C... 1,000

3531 Construction Machinery and Equipment. 750

3537 Industrial Trucks, Tractors, 750

Trailers, and Stackers.

3562 Ball and Roller Bearings............. 750

3571 Electronic Computers................. 1,000

3572 Computer Storage Devices............. 1,000

3575 Computer Terminals................... 1,000

3577 Computer Peripheral Equipment, N.E.C. 1,000

3578 Calculating and Accounting Machines, 1,000

Except Electronic Computers.

3585 Air-Conditioning and Warm Air Heating 750

Equipment and Commercial and Industrial

Refrigeration Equipment.

3612 Power, Distribution, and Speciality 750

Transformers.

3613 Switchgear and Switchboard Apparatus. 750

3621 Motors and Generators................ 1,000

3624 Carbon and Graphite Products......... 750

3625 Relays and Industrial Controls....... 750

3631 Household Cooking Equipment.......... 750

3632 Household Refrigerators and Home and 1,000

Farm Freezers.

3633 Household Laundry Equipment.......... 1,000

[[Page 58000]]

3634 Electric Housewares and Fans......... 750

3635 Household Vacuum Cleaners............ 750

3641 Electric Lamp Bulbs and Tubes........ 1,000

3651 Household Audio and Video Equipment.. 750

3652 Phonograph Records and Prerecorded 750

Audio Tapes and Disks.

3661 Telephone and Telegraph Apparatus.... 1,000

3663 Radio and Television Broadcasting and 750

Communications Equipment.

3669 Communications Equipment, N.E.C...... 750

3671 Electron Tubes....................... 750

3692 Primary Batteries, Dry and Wet....... 1,000

3694 Electrical Equipment for Internal 750

Combustion Engines.

3695 Magnetic and Optical Recording Media. 1,000

3699 Electrical Machinery, Equipment, and 750

Supplies, N.E.C.

3711 Motor Vehicles and Passenger Car 1,000

Bodies.

3714 Motor Vehicle Parts and Accessories.. 750

3716 Motor Homes.......................... 1,000

3721 Aircraft............................. 1,500

3724 Aircraft Engines and Engine Parts.... 1,000

3728 Aircraft Parts and Auxiliary 1,000 \9\

Equipment, N.E.C.

3731 Shipbuilding and Repair of Nuclear 1,000

Propelled Ships.

Shipbuilding of Nonnuclear Propelled 1,000

Ships and Nonpropelled Ships.

Ship Repair (Including Overhauls and 1,000

Conversions) Performed on Nonnuclear

Propelled and Nonpropelled Ships East

of the 108 Meridian.

Ships Repair (Including Overhauls and 1,000

Conversion) Performed on Nonnuclear

Propelled and Nonpropelled Ships West

of the 108 Meridian.

3743 Railroad Equipment................... 1,000

3761 Guided Missiles and Space Vehicles... 1,000

3764 Guided Missile and Space Vehicle 1,000

Propulsion Units and Propulsion Units

Parts.

3769 Guided Missiles and Space Vehicle 1,000

Parts and Auxiliary Equipment, N.E.C.

3795 Tanks and Tank Components............ 1,000

3812 Search, Detection, Navigation, 750

Guidance, Aeronautical, and Nautical

Systems and Instruments.

3996 Linoleum, Asphalted-Felt-Base, and 750

Other Hard Surface Floor Coverings, N.E.C.

================================================

DIVISION E--TRANSPORTATION, COMMUNICATIONS ELECTRIC, GAS, AND SANITARY

SERVICES

------------------------------------------------------------------------

MAJOR GROUP 40--RAILROAD TRANSPORTATION........ 1500

EXCEPT:

4013 Railroad Switching and Terminal 500

Establishments.

MAJOR GROUP 41--LOCAL AND SUBURBAN TRANSIT AND 5.0

INTERURBAN HIGHWAY AND PASSENGER

TRANSPORTATION.

MAJOR GROUP 42--MOTOR FREIGHT TRANSPORTATION 18.5

AND WAREHOUSING.

EXCEPT:

4212 (Part) Garbage and Refuse Collection, 6.0

Without Disposal.

4231 Terminal and Joint Terminal 5.0

Maintenance Facilities for Motor Freight

Transportation.

MAJOR GROUP 44--WATER TRANSPORTATION........... 500

EXCEPT:

4491 Marine Cargo Handling................ 18.5

4492 Towing and Tugboat Services.......... 5.0

4493 Marinas.............................. 5.0

4499 Water Transportation Services, N.E.C. 5.0

Offshore Marine Water Transportation 20.5

Services.

MAJOR GROUP 45--TRANSPORTATION BY AIR.......... 1500

EXCEPT:

4522 Air Transportation, Nonscheduled..... 1500

Offshore Marine Air Transportation 20.5

Services.

4581 Airports, Flying Fields, and Airport 5.0

Terminal Services.

MAJOR GROUP 46--PIPELINES, EXCEPT NATURAL GAS.. 1500

EXCEPT:

4619 Pipelines, N.E.C..................... 25.0

MAJOR GROUP 47--TRANSPORTATION SERVICES........ 5.0

EXCEPT:

4724 Travel Agencies...................... 1.0 \6\

4731 Arrangement of Transportation of 18.5

Freight and Cargo.

4783 Packing and Crating.................. 18.5

MAJOR GROUP 48--COMMUNICATIONS:

4812 Radiotelephone Communications........ 1,500

4813 Telephone Communications, Except 1,500

Radiotelephone.

[[Page 58001]]

4822 Telegraph and Other Message 5.0

Communications.

4832 Radio Broadcasting Stations.......... 5.0

4833 Television Broadcasting Stations..... 10.5

4841 Cable and Other Pay Television 11.0

Services.

4899 Communications Services, N.E.C....... 11.0

MAJOR GROUP 49--ELECTRIC, GAS, AND SANITARY 5.0

SERVICES.

EXCEPT:

4911 Electric Services.................... 4 million megawatt hrs.

4924 Natural Gas Distribution............. 500

4953 Refuse Systems....................... 6.0

4961 Steam and Air-Conditioning Supply.... 9.0

DIVISION F--WHOLESALE TRADE.................... 100

(Not Applicable to Government procurement of

supplies. The nonmanufacturer size standard

of 500 employees shall be used for purposes

of Government procurement of supplies.)

DIVISION G--RETAIL TRADE....................... 5.0

(Not Applicable to Government procurement of

supplies. The nonmanufacturer size standard

of 500 employees shall be used for purposes

of Government procurement of supplies.)

5271 Mobile Home Dealers.................. 9.5

5311 Department Stores.................... 20.0

5331 Variety Stores....................... 8.0

5411 Grocery Stores....................... 20.0

5511 Motor Vehicle Dealers (New and Used). 21.0

5521 Motor Vehicle Dealers (Used Only).... 17.0

5541 Gasoline Service Stations............ 6.5

5599 Automobile Dealers, N.E.C............ 5.0

Aircraft Dealers, Retail............. 7.5

5611 Men's and Boy's Clothing and 6.5

Accessory Stores.

5621 Women's Clothing Stores.............. 6.5

5651 Family Clothing Stores............... 6.5

5661 Shoe Stores.......................... 6.5

5722 Household Appliance Stores........... 6.5

5731 Radio, Television, and Consumer 6.5

Electronics Stores.

5734 Computer and Computer Software Stores 6.5

5812 Food Service, Institutional.......... 15.0

5961 Catalog and Mail-Order Houses........ 18.5

5983 Fuel Oil Dealers..................... 9.0

DIVISION H--FINANCE, INSURANCE, AND REAL ESTATE 5.0

EXCEPT:

6021-6082 National and Commercial Banks, 100 Million in

Savings, Institutions and Credit Unions. assets\7\

6331 Fire, Marine, and Casualty Insurance. 1,500

6515 (Part) Leasing of Building Space to 15.0\8\

Federal Government by Owners.

6531 Real Estate Agents and Managers...... 1.5 \6\

DIVISION I--SERVICES........................... 5.0

EXCEPT:

7211 Power Laundries, Family and 10.5

Commercial.

7213 Linen Supply......................... 10.5

7216 Drycleaning Plants, Except Rug 3.5

Cleaning.

7217 Carpet and Upholstery Cleaning....... 3.5

7218 Industrial Launderers................ 10.5

7311 Advertising Agencies................. 5.0\6\

7312 Outdoor Advertising Services......... 5.0\6\

7313 Radio, Television, and Publishers' 5.0\6\

Advertising Representatives.

7319 Advertising, N.E.C................... 5.0\6\

7349 Building Cleaning and Maintenance 12.0

Services, N.E.C..

7371 Computer Programming Services........ 18.0

7372 Prepackaged Software................. 18.0

7373 Computer Integrated Systems Design... 18.0

7374 Computer Processing and Data 18.0

Preparation and Processing Services.

7375 Information Retrieval Services....... 18.0

7376 Computer Facilities Management 18.0

Services.

7377 Computer Rental and Leasing.......... 18.0

7378 Computer Maintenance and Repair...... 18.0

7379 Computer Related Services, N.E.C..... 18.0

7381 Detective, Guard, and Armored Car 9.0

Services.

7382 Security Systems Services............ 9.0

[[Page 58002]]

7389 Business Services, N.E.C............. 5.0

Map Drafting Services, Mapmaking 3.5

(Including Aerial) and Photogrammetric

Mapping Services.

7513 Truck Rental and Leasing, Without 18.5

Drivers.

7514 Passenger Car Rental................. 18.5

7515 Passenger Car Leasing................ 18.5

7534 Tire Retreading and Repair Shops..... 10.5

7699 Repair Shops and Related Services, 5.0\9\

N.E.C..

7812 Motion Picture and Video Tape 21.5

Production.

7819 Services Allied to Motion Picture 21.5

Production.

7822 Motion Picture and Video Tape 21.5

Distribution.

8299 Flight Training Services............. 18.5

8711 Engineering Services................. 2.5

Military and Aerospace Equipment and 20.0

Military Weapons.

Contracts and Subcontracts for 20.0

Engineering Services Awarded Under the

National Energy Policy Act of 1992.

Marine Engineering and Naval 13.5

Architecture.

8712 Architectural Services (Other Than 2.5

Naval).

8713 Surveying Services................... 2.5

8721 Accounting, Auditing, and Bookkeeping 6.0

Services.

8731 Commercial Physical and Biological 500 \10\

Research.

Aircraft............................... 1,500

Aircraft Parts, and Auxiliary 1,000

Equipment, and Aircraft Engines and

Engine Parts.

Space Vehicles and Guided Missiles, 1,000

their Propulsion Units, their

Propulsion Units Parts, and their

Auxiliary Equipment and Parts.

8741 (Part) Conference Management Services 5.0 \6\

8744 Facilities Support Management 5.0 \11\

Services.

Base Maintenance....................... 20.0 \12\

Environmental Remediation Services..... 500 \13\

------------------------------------------------------------------------

Footnotes:

\1\ SIC code1629--Dredging: To be considered small for purpose of

Government procurement, a firm must perform at least 40 percent of the

volume dredged with its own equipment or equipment owned by another

small dredging concern.

\2\ SIC Division D--Manufacturing: For rebuilding machinery or equipment

on a factory basis, or equivalent, use the SIC code for a newly

manufactured product. Concerns performing major rebuilding or overhaul

activities do not necessarily have to meet the criteria for being a

``manufacturer'' although the activities may be classified under a

manufacturing SIC code. Ordinary repair services or preservation are

not considered rebuilding.

\3\ SIC code 2033: For purposes of Government procurement for food

canning and preserving, the standard of 500 employees excludes

agricultural labor as defined in Sec. 3306(k) of the Internal Revenue

Code, 26 U.S.C. 3306(k).

\4\ SIC code 2911: For purposes of Government procurement, the firm may

not have more than 1,500 employees nor more than 75,000 barrels per

day capacity of petroleum-based inputs, including crude oil or bona

fide feedstocks. Capacity includes owned or leased facilities as well

as facilities under a processing agreement or an arrangement such as

an exchange agreement or a throughput. The total product to be

delivered under the contract must be at least 90 percent refined by

the successful bidder from either crude oil or bona fide feedstocks.

\5\ SIC code 3011: For purposes of Government procurement, a firm is

small for bidding on a contract for pneumatic tires within Census

Classification codes 30111 and 30112, provided that: (1) The value of

tires within Census Classification codes 30111 and 30112 which it

manufactured in the United States during the previous calendar year is

more than 50 percent of the value of its total worldwide manufacture,

(2) the value of pneumatic tires within Census Classification codes

30111 and 30112 comprising its total worldwide manufacture during the

preceding calendar year was less than 5 percent of the value of all

such tires manufactured in the United States during that period, and

(3) the value of the principal product which it manufactured or

otherwise produced, or sold worldwide during the preceding calendar

year is less than 10 percent of the total value of such products

manufactured or otherwise produced or sold in the United States during

that period.

\6\ SIC codes 4724, 6531, 7311, 7312, 7313, 7319, and 8741: As measured

by total revenues, but excluding funds received in trust for an

unaffiliated third party, such as bookings or sales subject to

commissions. The commissions received are included as revenue.

\7\ A financial institution's assets are determined by averaging the

assets reported on its four quarterly financial statements for the

preceding year. Assets for the purposes of this size standard means

the assets defined according to the Federal Financial Institution

Examinations Council 034 call report form.

\8\ SIC code 6515: Leasing of building space to the Federal Government

by Owners: For Government procurement, a size standard of $15.0

million in gross receipts applies to the owners of building space

leased to the Federal Government. The standard does not apply to an

agent.

\9\ SIC codes 7699 and 3728: Contracts for the rebuilding or overhaul of

aircraft ground support equipment on a contract basis are classified

under SIC 3728.

\10\ SIC code 8731: For research and development contracts requiring the

delivery of a manufactured product, the appropriate size standard is

that of the manufacturing industry.

(1) Research and Development means laboratory or other physical

research and development. It does not include economic, educational,

engineering, operations, systems, or other nonphysical research; or

computer programming, data processing, commercial and/or medical

laboratory testing.

(2) For purposes of the Small Business Innovation Research (SBIR)

program only, a different definition has been established by law. See

Sec. 121.701 of these regulations.

(3) Research and development for guided missiles and space vehicles

includes evaluation and simulation, and other services requiring

thorough knowledge of complete missiles and spacecraft.

\11\ Facilities Management, a component of SIC code 8744, includes

establishments, not elsewhere classified, which provide overall

management and the personnel to perform a variety of related support

services in operating a complete facility in or around a specific

building, or within another business or Government establishment.

Facilities management means furnishing three or more personnel supply

services which may include, but are not limited to, secretarial

services, typists, telephone answering, reproduction or mimeograph

service, mailing service, financial or business management, public

relations, conference planning, travel arrangements, word processing,

maintaining files and/or libraries, switchboard operation, writers,

bookkeeping, minor office equipment maintenance and repair, or use of

information systems (not programming).

[[Page 58003]]

\12\ SIC code 8744: (1) If one of the activities of base maintenance, as

defined below, can be identified with a separate industry and that

activity (or industry) accounts for 50 percent or more of the value of

an entire contract, then the proper size standard is that of the

particular industry, and not the base maintenance size standard.

(2) ``Base Maintenance'' requires the performance of three or more

separate activities in the areas of service or special trade

construction industries. If services are performed, these activities

must each be in a separate SIC code including, but not limited to,

Janitorial and Custodial Service, Fire Prevention Service, Messenger

Service, Commissary Service, Protective Guard Service, and Grounds

Maintenance and Landscaping Service. If the contract requires the use

of special trade contractors (plumbing, painting, plastering,

carpentry, etc.), all such special trade construction activities are

considered a single activity and classified as Base Housing

Maintenance. Since Base Housing Maintenance is only one activity, two

additional activities are required for a contract to be classified as

``Base Maintenance.''

\13\ SIC code 8744: (1) For SBA assistance as a small business concern

in the industry of Environmental Remediation Services, other than for

Government procurement, a concern must be engaged primarily in

furnishing a range of services for the remediation of a contaminated

environment to an acceptable condition including, but not limited to,

preliminary assessment, site inspection, testing, remedial

investigation, feasibility studies, remedial design, containment,

remedial action, removal of contaminated materials, storage of

contaminated materials and security and site closeouts. If one of such

activities accounts for 50 percent or more of a concern's total

revenues, employees, or other related factors, the concern's primary

industry is that of the particular industry and not the Environmental

Remediation Services Industry.

(2) For purposes of classifying a Government procurement as

Environmental Remediation Services, the general purpose of the

procurement must be to restore a contaminated environment and also the

procurement must be composed of activities in three or more separate

industries with separate SIC codes or, in some instances (e.g.,

engineering), smaller sub-components of SIC codes with separate,

distinct size standards. These activities may include, but are not

limited to, separate activities in industries such as: Heavy

Construction; Special Trade Construction; Engineering Services;

Architectural Services; Management Services; Refuse Systems; Sanitary

Services, Not Elsewhere Classified; Local Trucking Without Storage;

Testing Laboratories; and Commercial, Physical and Biological

Research. If any activity in the procurement can be identified with a

separate SIC code, or component of a code with a separate distinct

size standard, and that industry accounts for 50 percent or more of

the value of the entire procurement, then the proper size standard is

the one for that particular industry, and not the Environmental

Remediation Service size standard.

Size Eligibility For SBA Financial Assistance

Sec. 121.301 What size standards are applicable to financial

assistance programs?

(a) For Business Loans and Disaster Loans (other than physical

disaster loans), an applicant must not exceed the size standard for the

industry in which:

(1) The applicant combined with its affiliates is primarily

engaged; and

(2) The applicant alone is primarily engaged.

(b) For Development Company programs, an applicant must meet one of

the following standards:

(1) Including its affiliates, net worth not in excess of $6

million, and average net income after Federal income taxes (excluding

any carry-over losses) for the preceding two completed fiscal years not

in excess of $2 million; or

(2) The same standards applicable under paragraph (a) of this

section.

(c) For the Small Business Investment Company (SBIC) program, an

applicant must meet one of the following standards:

(1) Including its affiliates, net worth not in excess of $18

million average and net income after Federal income taxes (excluding

any carry-over losses) for the preceding 2 completed fiscal years not

in excess of $6 million; or

(2) The same standards applicable under paragraph (a) of this

section.

(d) For Surety Bond Guarantee assistance--

(1) Any construction (general or special trade) concern or concern

performing a contract for services is small if its average annual

receipts do not exceed $5.0 million.

(2) Any concern not specified in paragraph (d)(1) of this section

must meet the size standard for the primary industry in which it,

combined with its affiliates, is engaged.

(e) The applicable size standards for the purpose of all SBA

financial assistance programs, excluding the Surety Bond Guarantee

assistance program, are increased by 25 percent whenever the applicant

agrees to use the assistance within a labor surplus area. Labor surplus

areas are listed monthly in the Department of Labor publication called

``Area Trends.''

Sec. 121.302 When does SBA determine the size status of an applicant?

(a) The size of an applicant for SBA financial assistance is

determined as of the date the application for such financial assistance

is received by SBA, except for the Disaster Loan and Preferred Lenders

programs.

(b) For the Preferred Lenders program, size is determined as of the

date of approval of the loan by the Preferred Lender.

(c) For disaster loan assistance (other than physical disaster

loans), size status is determined as of the date the disaster

commenced, as set forth in the Disaster Declaration.

(d) Changes in size subsequent to the applicable date when size is

determined will not disqualify an applicant for assistance.

Sec. 121.303 What size procedures are used by SBA before it makes a

formal size determination?

(a) A concern that submits an application for financial assistance

is deemed to have certified that it is small under the applicable size

standard. SBA may question the concern's status based on information

supplied in the application or from any other source.

(b) A small business investment company, a development company, a

surety bond company, or a preferred lender may accept as true the size

information provided by an applicant, unless credible evidence to the

contrary is apparent.

(c) Size is initially considered by the individual with final

financial assistance authority. This is not a formal size

determination. A formal determination may be requested prior to a

denial of eligibility based on size.

(d) An applicant may request a formal size determination when

assistance has been denied for size ineligibility. Except for disaster

loan eligibility, a request for a formal size determination must be

made to the Government Contracting Area Director serving the area in

which the headquarters of the applicant is located, regardless of the

location of the parent company or affiliates. For disaster loan

assistance, the request for a size determination must be made to the

Area Director for the Disaster Area Office which denied the assistance.

(e) There are no time limitations for making a formal size

determination for purposes of financial assistance. The official making

the formal size determination must provide a copy of the determination

to the applicant, to the requesting SBA official, and to other

interested SBA program officials.

Sec. 121.304 What are the size requirements for refinancing an

existing SBA loan?

If natural growth (as distinguished from merger, acquisition or

similar management action) since the date of original financing causes

a firm to exceed its applicable size standard, it will still be small

for the purpose of refinancing an existing SBA loan or guarantee.

Otherwise, the firm and its affiliates must be small at the time of

application for refinancing.

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Sec. 121.305 What size eligibility requirements exist for obtaining

business loans relating to particular procurements?

A concern qualified as small for a particular procurement,

including an 8(a) subcontract, is small for financial assistance

directly and primarily relating to the performance of the particular

procurement.

Size Eligibility Requirements for Government Procurement

Sec. 121.401 What procurement programs are subject to size

determinations?

The requirements set forth in Secs. 121.401-121.412 cover all

procurement programs for which status as a small business is required,

including the small business set-aside program, SBA's Certificate of

Competency Program, SBA's Minority Enterprise Development program, the

Small Business Subcontracting program authorized under section 8(d) of

the Small Business Act, and federal Small Disadvantaged Business

programs.

Sec. 121.402 What size standards are applicable to procurement

assistance programs?

(a) A concern must meet the size standard for the SIC code

specified in the solicitation.

(b) The procuring agency contracting officer, or authorized

representative, designates the proper SIC code and size standard in a

solicitation, selecting the SIC code which best describes the principal

purpose of the product or service being acquired. Primary consideration

is given to the industry descriptions in the SIC Manual, the product or

service description in the solicitation and any attachments to it, the

relative value and importance of the components of the procurement

making up the end item being procured, and the function of the goods or

services being purchased. Other factors considered include previous

Government procurement classifications of the same or similar products

or services, and the classification which would best serve the purposes

of the Small Business Act. A procurement is usually classified

according to the component which accounts for the greatest percentage

of contract value.

(c) The SIC code assigned to a procurement and its corresponding

size standard is final unless timely appealed to SBA's Office of

Hearings and Appeals (OHA), or unless SBA assigns a SIC code or size

standard as provided in paragraph (d) of this section.

(d) An unclear, incomplete or missing SIC code designation or size

standard in the solicitation may be clarified, completed or supplied by

SBA in connection with a formal size determination or size appeal.

(e) Any offeror or other interested party adversely affected by a

SIC code designation or size standard designation may appeal the

designations to OHA under Part 134 of this chapter.

Sec. 121.403 Are SBA size determinations and SIC code designations

binding on parties?

Formal size determinations and SIC code designations made by

authorized SBA officials are binding upon the parties. Opinions

otherwise provided by SBA officials to contracting officers or others

are advisory in nature, and are not binding or appealable.

Sec. 121.404 When does SBA determine the size status of a business

concern?

Generally, SBA determines the size status of a concern (including

its affiliates) as of the date the concern submits a written self-

certification that it is small to the procuring agency as part of its

initial offer including price. The following are two exceptions to this

rule:

(a) The size status of an applicant for a Certificate of Competency

(COC) relating to an unrestricted procurement is determined as of the

date of the concern's application for the COC.

(b) Size status for purposes of compliance with the nonmanufacturer

rule set forth in Sec. 121.406(b)(1) and the ostensible subcontractor

rule set forth in Sec. 121.103(f)(3) is determined as of the date of

the best and final offer.

Sec. 121.405 May a business concern self-certify its small business

size status?

(a) A concern must self-certify it is small under the size standard

specified in the solicitation, or as clarified, completed or supplied

by SBA pursuant to Sec. 121.402(d).

(b) A contracting officer may accept a concern's self-certification

as true for the particular procurement involved in the absence of a

written protest by other offerors or other credible information which

causes the contracting officer or SBA to question the size of the

concern.

(c) Procedures for protesting the self-certification of an offeror

are set forth in Secs. 121.1001-121.1009.

Sec. 121.406 How does a small business concern qualify to provide

manufactured products under small business set-aside or MED

procurements?

(a) General. In order to qualify as a small business concern for a

small business set-aside or 8(a) contract to provide manufactured

products, an offeror must either:

(1) Be the manufacturer of the end item being procured (and the end

item must be manufactured or produced in the United States); or

(2) Comply with the requirements of paragraphs (b), (c) or (d) of

this section as a nonmanufacturer, a kit assembler or a supplier under

Simplified Acquisition Procedures.

(b) Nonmanufacturers. (1) A concern may qualify for a requirement

to provide manufactured products as a nonmanufacturer if it:

(i) Does not exceed 500 employees;

(ii) Is primarily engaged in the wholesale or retail trade and

normally sells the items being supplied to the general public; and

(iii) Will supply the end item of a small business manufacturer or

processor made in the United States, or obtains a waiver of such

requirement pursuant to paragraph (b)(3) of this section.

(2) For size purposes, there can be only one manufacturer of the

end item being acquired. The manufacturer is the concern which, with

its own facilities, performs the primary activities in transforming

inorganic or organic substances, including the assembly of parts and

components, into the end item being acquired. The end item must possess

characteristics which, as a result of mechanical, chemical or human

action, it did not possess before the original substances, parts or

components were assembled or transformed. The end item may be finished

and ready for utilization or consumption, or it may be semifinished as

a raw material to be used in further manufacturing. Firms which perform

only minimal operations upon the item being procured do not qualify as

manufacturers of the end item. SBA will evaluate the following factors

in determining whether a concern is the manufacturer of the end item:

(i) The proportion of total value in the end item added by the

efforts of the concern, excluding costs of overhead, testing, quality

control, and profit; and

(ii) The importance of the elements added by the concern to the

function of the end item, regardless of their relative value.

(3) The Administrator or designee may waive the requirement set

forth in paragraph (b)(1)(iii) of this section under the following two

circumstances:

(i) The contracting officer has determined that no small business

manufacturer or processor reasonably can be expected to offer a product

meeting the specifications (including period for performance) required

by a particular solicitation and SBA reviews and accepts that

determination; or

(ii) SBA determines that no small business manufacturer or

processor of

[[Page 58005]]

the product or class of products is available to participate in the

Federal procurement market.

(4) The two waiver possibilities identified in paragraph (b)(3) of

this section are called ``individual'' waivers and ``class'' waivers

respectively, and the procedures for them are contained in

Sec. 121.1301.

(5) Any SBA waiver of the nonmanufacturer rule has no effect on

requirements external to the Small Business Act which involve domestic

sources of supply, such as the Buy American Act.

(c) Kit assemblers. (1) Where the manufactured item being acquired

is a kit of supplies or other goods provided by an offeror for a

special purpose, the offeror cannot exceed 500 employees, and 50

percent of the total value of the components of the kit must be

manufactured by business concerns in the United States which are small

under the size standards for the SIC codes of the components being

assembled. The offeror need not itself be the manufacturer of any of

the items assembled.

(2) Where the Government has specified an item for the kit which is

not produced by U.S. small business concerns, such item shall be

excluded from the calculation of total value in paragraph (c)(1) of

this section.

(d) Simplified Acquisition Procedures. Where the procurement of a

manufactured item is processed under Simplified Acquisition Procedures,

as defined in Sec. 13.101 of the Federal Acquisition Regulation (FAR)

(48 CFR 13.101), and where the anticipated cost of the procurement will

not exceed $25,000, the offeror need not supply the end product of a

small business concern as long as the product acquired is manufactured

or produced in the United States, and the offeror does not exceed 500

employees. The offeror need not itself be the manufacturer of any of

the items acquired.

Sec. 121.407 What are the size procedures for multiple item

procurements?

If a procurement calls for two or more specific end items or types

of services with different size standards and the offeror may submit an

offer on any or all end items or types of services, the offeror must

meet the size standard for each end item or service item for which it

submits an offer. If the procurement calls for more than one specific

end item or type of service and an offeror is required to submit an

offer on all items, the offeror may qualify as a small business for the

procurement if it meets the size standard of the item which accounts

for the greatest percentage of the total contract value.

Sec. 121.408 What are the size procedures for SBA's Certificate of

Competency Program?

(a) A firm which applies for a COC must file an ``Application for

Small Business Size Determination'' (SBA Form 355). If the initial

review of SBA Form 355 indicates the applicant, including its

affiliates, is small for purposes of the COC program, SBA will process

the application for COC. If the review indicates the applicant,

including its affiliates, is other than small, SBA will initiate a

formal size determination as set forth in Sec. 121.1009. In such a

case, SBA will not further process the COC application until a formal

size determination is made.

(b) A concern is ineligible for a COC if a formal SBA size

determination finds the concern other than small.

Sec. 121.409 What size standard applies in an unrestricted procurement

for Certificate of Competency purposes?

For the purpose of receiving a Certificate of Competency in an

unrestricted procurement, the applicable size standard is that

corresponding to the SIC code set forth in the solicitation. For a

manufactured product, a concern must also furnish a domestically

produced or manufactured product, regardless of the size status of the

product manufacturer. The offeror need not be the manufacturer of any

of the items acquired.

Sec. 121.410 What are the size standards for SBA's Section 8(d)

Subcontracting Program?

For subcontracting purposes pursuant to section 8(d) of the Small

Business Act, a concern is small:

(a) For subcontracts of $10,000 or less which relate to Government

procurements, if its number of employees (including its affiliates)

does not exceed 500 employees. However, subcontracts for engineering

services awarded under the National Energy Policy Act of 1992 have the

same size standard as Military and Aerospace Equipment and Military

Weapons under SIC code 8711;

(b) For subcontracts exceeding $10,000 which relate to Government

procurements, if its number of employees or average annual receipts

(including its affiliates) does not exceed the size standard for the

product or service it is providing on the subcontract; and

(c) For subcontracts for financial services, if the concern

(including its affiliates) is a commercial bank or savings and loan

association whose assets do not exceed $100 million.

Sec. 121.411 What are the size procedures for SBA's Section 8(d)

Subcontracting Program?

(a) Prime contractors may rely on the information contained in

SBA's Procurement Automated Source System (PASS), or equivalent data

base maintained or sanctioned by SBA, as an accurate representation of

a concern's size and ownership characteristics for purposes of

maintaining a small business source list. Even though a concern is on a

small business source list, it must still qualify and self-certify as a

small business at the time it submits its offer as a section 8(d)

subcontractor.

(b) Upon determination of the successful subcontract offeror for a

competitive subcontract, but prior to award, the prime contractor must

inform each unsuccessful subcontract offeror in writing of the name and

location of the apparent successful offeror.

(c) The self-certification of a concern subcontracting or proposing

to subcontract under section 8(d) of the Small Business Act may be

protested by the contracting officer, the prime contractor, the

appropriate SBA official or any other interested party.

Sec. 121.412 What are the size procedures for partial small business

set-asides?

A firm is required to meet size standard requirements only for the

small business set-aside portion of a procurement, and is not required

to qualify as a small business for the unrestricted portion.

Size Eligibility Requirements for Sale or Lease of Government Property

Sec. 121.501 What programs for sale or lease of Government property

are subject to size determinations?

Sections 121.501-121.512 apply to small business size

determinations for the purpose of the sale or lease of Government

property, including the Timber Sales Program, the Special Salvage

Timber Sales Program, and the sale of Government petroleum, coal and

uranium.

Sec. 121.502 What size standards are applicable to programs for sale

or lease of Government property?

(a) Unless otherwise specified in this part--

(1) A concern primarily engaged in manufacturing is small for sale

or lease of Government property if it does not exceed 500 employees;

(2) A concern not primarily engaged in manufacturing is small for

sale or lease of Government property if it has annual receipts not

exceeding $2 million.

[[Page 58006]]

(b) Size status for such sales and leases is determined by the

primary industry of the applicant business concern.

Sec. 121.503 Are SBA size determinations binding on parties?

Formal size determinations based upon a specific Government sale or

lease, or made

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