Small Business Size Standards

SMALL BUSINESS ADMINISTRATION

13 CFR Part 121

Small Business Size Standards

AGENCY: Small Business Administration.

ACTION: Final 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. As a result, SBA is clarifying and streamlining its

regulations. This final rule improves 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 will be more understandable and much

easier to use, and will reduce the number of sections comprising Part

121 from eighteen to thirteen. The rule improves language, but does not

change the existing size standards which apply to particular

industries.

EFFECTIVE DATE: This rule is effective on March 1, 1996.

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

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

SUPPLEMENTARY INFORMATION: On November 24, 1995, SBA published a

proposed rule in the Federal Register (60 FR 57982) to completely

revise its regulations governing the size determination program. SBA's

intent in finalizing that rule is to streamline the size standards

operation by simplifying and clarifying existing regulatory language

and by eliminating unnecessary, irrelevant, or obsolete provisions. The

final rule amends 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.

The proposed rule contained eligibility requirements for

organizations for the handicapped to receive awards of contracts set

aside for small business and procedures for filing protests regarding

the status of handicapped organizations (proposed Secs. 121.1201-

121.1206). Those sections have been removed from this final rule

because the authority for such eligibility has expired. As a

consequence, Secs. 121.1301-121.1305 of the proposed rule have been

renumbered as Secs. 121.1201-121.1205 in this final rule.

SBA received and considered 25 timely comments in response to the

proposed rule. The comments, as well as SBA's response to them, are

discussed below. Other than the changes identified below in response to

the comments and the elimination of proposed Secs. 121.1201-121.1206

(as discussed above), the regulatory text of Part 121 has not been

changed from the proposed rule. For a section by section analysis of

the revised Part 121 and SBA's rationale for any changes from the pre-

existing regulations, see the supplementary information published as

part of the proposed rule (60 FR 57982).

Analysis of Comments Received

SBA received and considered eight comments to the proposed text for

its affiliation regulation (proposed Sec. 121.103). Six of these

comments responded to the proposed exclusion from affiliation coverage

afforded certain private investors that are engaged in the business of

providing equity and/or debt financing to third parties. In addition to

the existing exclusion from affiliation for Small Business Investment

Companies (SBICs) and Development Companies, the proposed rule added an

exclusion, for purposes of SBIC assistance only, for concerns owned by

certain venture capital firms, pension funds, and charitable entities

exempt from federal taxation under Sec. 501(c) of the Internal Revenue

Code. The proposed rule imposed the same control limitations on these

investors as those imposed by SBA on SBICs under 13 CFR Part 107.

While the commenters supported SBA's intent to add an exclusion

from affiliation for the listed investors, they thought that the

proposal did not go far enough. One commenter agreed with the proposal

to include venture capital operating companies (VCOCs) in the list of

investors which would not be affiliated with applicant concerns, but

felt that limiting the exception to financial investors that

technically qualify as VCOCs might not achieve the desired goal. The

commenter pointed out that a fund which resembles a VCOC because it has

at least 50% of its portfolio in ``qualified venture capital

investments'' and it obtains and exercises certain ``management

rights'' with respect to those investments may nevertheless fail to

qualify as a VCOC if its first investment was a passive investment. The

commenter suggested that the affiliation exemption should be made

available to any investing company that (1) has 50% of its portfolio in

``qualified venture capital investments'' at the time size is

determined, or (2) would qualify as a VCOC but for its first

investment.

SBA has considered the suggestion but has decided to limit

Sec. 121.103(b)(5)(i) to VCOCs, as proposed. SBA understands that other

investors may exist whose investment goals, policies and activities are

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identical to those of a VCOC, but who for one reason or another are not

considered VCOCs. However, to properly administer a regulation that

refers to the type of investments of a private entity would demand

resources far in excess of those available to SBA. If, on the other

hand, the private investor's status as a VCOC is the criteria for

exemption from affiliation, SBA examiners need look no farther than a

statement from the entity that it is a VCOC. SBA believes a statement

of this type is likely to be reliable, since any company that is a VCOC

is subject to certain requirements under Department of Labor

regulations.

Another commenter recommended that the exclusion from affiliation

be broadened to include any non-registered investment company

beneficially owned by less than 100 persons if such company's sales

literature or organization documents indicate that its principal

purpose is investment in securities rather than the operation of

commercial enterprises. The commenter felt that a concern that meets

the definition of an ``investment company'' under the Investment

Company Act of 1940, as amended (the 1940 Act), has the necessary

investment characteristics even though it is not registered under the

1940 Act due to the number of its beneficial owners. SBA agrees and has

added a new paragraph (vi) to Sec. 121.103(b)(5).

Three commenters argued that lack of control over the small concern

should not be a requirement for an investor to benefit from the

exclusion from affiliation. SBA disagrees. A small concern must be

independently owned and operated, in addition to being small, in order

to be eligible for SBIC assistance. See 15 USC 632 and 15 USC 662.

Generally, a business that is controlled by its large investors does

not satisfy this statutory requirement. In Part 107, however, SBA has

identified certain special circumstances under which SBICs are

permitted to assume control over a small concern. See 13 CFR

Sec. 107.865(c) and (d). In the proposed rule covering Part 121, SBA

proposed to extend those exceptions to the private firms listed in

Sec. 121.103(b)(5). SBA is finalizing that proposal, but would like to

clarify two points regarding the application of the control test to

those private investors:

First, ``control'' will be determined under Sec. 107.865, which

incorporates the definition of Control under Sec. 107.50. Second, the

requirement in Sec. 107.865(e) for an SBIC assuming temporary control

over a concern to file a control certification with SBA would not apply

to non-SBIC investors in the concern.

SBA is also taking this opportunity to correct a drafting error in

current Sec. 121.401(b), which was repeated in proposed

Sec. 121.103(b)(1). Both sections provide an unconditional exclusion

from the affiliation rules for the entities listed therein, and both

sections mention investment companies registered under the 1940 Act.

However, it was never SBA's intent to provide an exclusion from

affiliation for all investment companies registered under the 1940 Act.

The regulation was intended to cover only those registered investment

companies that are also SBICs. See 54 FR 52634 (December 21, 1989). In

the final rule adopted today, registered investment companies are

treated the same as non-registered investment companies--they will not

be considered affiliated with the applicant concern if they satisfy the

control test under Sec. 107.865. Registered investment companies are

listed under new Sec. 121.103(b)(5)(v) in the final rule.

Finally, one commenter recommended expanding the exclusion from

affiliation in Sec. 121.103(b)(5) to include all investors primarily

engaged in the business of providing equity and/or debt financing to

third parties. SBA believes that such an exclusion is too broad, and

does not adopt it in this final rule.

One commenter expressed concern that ``common facilities'' had been

eliminated as a separate basis for finding affiliation in the proposed

rule, and recommended that it be reinserted in the final rule. Although

the proposed rule eliminated ``common facilities'' as a separate basis

for finding affiliation, it was not SBA's intent to prohibit SBA from

considering all appropriate factors, including ``common facilities,''

in determining whether affiliation exists. Section 121.103(a)(2) lists

certain factors that may be considered by SBA in determining whether

affiliation exists. It states that SBA considers factors such as

ownership, management, and contractual relationships, but does not

intend that list to be exhaustive. SBA believes that the flexibility to

make an appropriate affiliation determination was in the proposed

regulation, and does not add another separate basis for finding

affiliation in this rule.

Another commenter objected to the language of proposed

Sec. 121.103(c)(1) that eliminated the ``presumption'' of control for

persons that own, control, or have the power to control 50 percent or

more of a concern's voting stock contained in the predecessor

regulation at Sec. 121.401(e)(1). The commenter felt that the

regulation should provide only for a presumption of control which can

be negated by specific facts in a particular case (e.g., person may own

over 50% of voting stock, but through voting agreements or proxies may

have divested control of the company). SBA disagrees. SBA believes that

a person owning 50 percent of a concern should be deemed to control

that concern regardless of any voting agreements. A person that has

voting control of 50 percent of a concern, even if he or she does not

own the stock associated with the voting rights, would also be deemed

to control the concern, but that does not do away with the interests

attendant to a 50 percent owner.

SBA received 12 comments to its proposed revision to the definition

of ``annual receipts'' (proposed Sec. 121.104). Ten commenters

enthusiastically supported the revision of annual receipts that

eliminated the requirement that businesses operating on a cash basis

maintain a separate set of accrual basis books. They noted that such a

change will reduce paper work and expense. No change in the final rule

is made to that provision.

One commenter strongly supported the exclusion from annual receipts

for amounts collected by another by a conference management services

provider. Again, SBA concurs, and no change is made in this final rule.

One commenter recommended that custom brokers (businesses that

collect customs duties and federal revenues) should be able to exclude

``pass-through'' amounts from their annual receipts in determining

their size. The commenter felt that this added income distorts their

status as a small business. Pass-through amounts for custom brokers was

not an issue before the public in SBA's November 24, 1995 proposed

rule. As such, SBA cannot add such an exclusion in this final rule. In

addition, SBA has not performed an analysis of this industry to

determine whether such an exclusion is warranted. In order for such a

review to be done, interested parties must submit a request to the

Assistant Administrator of SBA's Size Standards Staff in Washington,

DC.

Finally, SBA has clarified what the term ``receipts'' encompasses

in this final rule. There was some internal confusion that the proposed

rule would have required a double counting of certain amounts by

requiring the inclusion of ``gross or total income'' plus ``cost of

goods sold.'' No double counting was intended, nor will it occur under

this regulation. The terms ``total income,'' ``gross income,'' and

``cost of goods sold'' come directly from the definitions of those

terms as set forth in applicable Internal Revenue Service (IRS) Federal

tax return forms. For a corporation (IRS Form 1120, line 11), a

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sub-chapter S corporation (IRS Form 1120S, line 6), or a partnership

(IRS Form 1065, line 8), the applicable term is ``total income.'' For a

sole proprietorship (Schedule C, IRS Form 1040, line 7), the applicable

term is ``gross income.'' To this amount, the ``cost of goods sold''

(IRS Form 1120, line 2; IRS Form 1120S, line 2; IRS Form 1065, line 2;

IRS Form 1040, Schedule C, line 4) is added to determine ``receipts''

for SBA purposes. SBA never intended to add ``cost of goods sold'' to

the ``gross receipts or sales'' figures identified in these IRS forms,

which would have resulted in some double counting.

One commenter believed that proposed Sec. 121.105(c) needed to be

clarified in the final rule. The proposed rule added that provision to

make it clear that if one entity is replaced by another having the same

assets and liabilities, the successor firm would not be treated as a

new entity for purposes of calculating annual receipts or employees.

SBA's regulations have historically required a concern that has

acquired or been acquired as an affiliate during the applicable

averaging period to include the receipts of both concerns in

determining size. See 13 CFR 121.402(e)(1) (1995). That provision is

retained in this final rule at Sec. 121.104(d). This new provision is

not intended to repeat that rule. It is intended to apply to the

situation where a business entity ceases and a ``new'' business entity

emerges with basically the same assets and liabilities as the previous

entity. In such a case, instead of treating the successor business

entity as a ``new'' concern, with Sec. 121.104((b)(2) or

Sec. 121.106(b)(3) applying as appropriate, the revenues or employees

of the predecessor concern will be counted for the full averaging

period. A business entity cannot reorganize and be able to avoid the

full application of SBA's size requirements.

One commenter recommended that the $6 million net worth and $2

million net income size standards for the Development Company program

should be increased for inflation because they have not changed since

their inception in 1980. The numerical value of specific size standards

was not an item proposed for change in the November 24, 1995 proposed

rule. As such, any change at this time would be contrary to the

requirements of the Administrative Procedures Act and inappropriate.

Anyone believing that specific size standards should be altered should

write to the Assistant Administrator of SBA's Size Standards Staff at

SBA's Headquarters, giving detailed reasons for the desired change.

Two commenters recommended that the reference to ``net worth'' in

proposed Sec. 121.301(b)(1) should be to ``tangible net worth,''

because items such as goodwill have no tangible value and should not be

taken into account during calculation of net worth for loan approval

purposes. SBA concurs and makes that revision in this final rule.

Four commenters opposed the elimination of a size standard

differential for Redevelopment Areas in the context of SBA financial

assistance (proposed Sec. 121.301(e)). They supported keeping the

differential for Redevelopment Areas for concerns seeking such

financial assistance. Alternatively, if the differential is eliminated,

they proposed increasing all receipt-based size standards by 25%. SBA

disagrees. The reason for the differential was to assist distressed

geographical areas needing development, not to increase all size

standards by 25% for purposes of SBA financial assistance. Because

Redevelopment Areas have become so common, however, that is effectively

what has occurred. In addition, unlike Labor Surplus Areas, which are

reviewed on a regular basis, a Redevelopment Area remains so designated

once it receives the designation. Thus, areas that are no longer

distressed remain eligible for the increased size standards. Given

these circumstances, SBA continues to believe that the Redevelopment

Area differential should be eliminated and the final rule reflects

that.

One commenter disagreed with the provision of Sec. 121.302

establishing size for financial assistance at the time the application

for assistance is received by SBA, stating that concerns do not make

applications directly to SBA. The commenter recommended that size

should be determined as of the date of the funding or commitment to

fund. SBA believes that the date of funding or commitment to fund is

too far along in the process to determine a concern's size. SBA should

not use its limited resources to determine loan-worthiness of a concern

that is ineligible to receive the financial assistance because of its

size. Thus, SBA believes that size must be determined when SBA starts

its analysis. That, however, may not occur when the application is

first received by SBA. Sometimes an application is not acted on

immediately because it is not complete. In response to this comment and

SBA's re-evaluation of its position, the final rule makes the date that

an application is accepted for processing by SBA as the date that a

concern's size is determined.

One commenter objected to the provision of proposed Sec. 121.304

which permits a business concern with an existing SBA loan to be

considered small for purposes of refinancing that loan even though it

exceeds the applicable size standard at the time of the refinancing.

This is a pre-existing SBA policy that was not changed by the November

24, 1995 proposed rule. That policy has existed for many years in order

to protect the Government's investment. SBA has added a sentence to

this section in this final rule to clarify that such refinancing would

occur only where SBA determines that it is necessary to protect the

Government's financial interest.

SBA received three comments regarding waivers to its

nonmanufacturer rule (Sec. 121.406(b)). One comment recommended that

the local SBA district office be empowered with the authority to

approve or disapprove requests for waivers of the non-manufacturer

rule. SBA disagrees. The statutory authority for such waivers is given

to SBA's Administrator. This authority has been delegated to SBA's

Associate Administrator for Government Contracting. While SBA has moved

more and more authority to local district offices wherever possible,

SBA believes that the authority to waive the nonmanufacturer rule needs

to remain at this level to ensure consistency and fairness in all SBA

offices.

Two commenters responded to SBA's proposed implementation of the

nonmanufacturer rule under Simplified Acquisition Procedures (SAP)

(proposed Sec. 121.406(d)). One commenter supported the provision as

written and applauded SBA's effort to consider the dilemma of regular

dealers, suppliers and distributors under SAP. The other commenter

recommended that the $25,000 ceiling below which a nonmanufacturer need

not supply the product of a small business (provided that the product

is manufactured or produced in the United States) should be increased

to $100,000. That commenter reasoned that the ceiling was $25,000 when

the Small Purchase amount was $25,000. Since SAP have replaced Small

Purchase Procedures and the threshold for SAP is $100,000, the

commenter believed that the nonmanufacturer ceiling should similarly be

raised to $100,000.

Existing SBA regulations (13 CFR 121.906 and 121.1106) implement

amendments made in 1988 to the Small Business Act (15 U.S.C.

637(a)(17)). Those regulations specify that to qualify for a small

business set-aside or section 8(a) procurement of a manufactured or

processed product, a small

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nonmanufacturer must provide the product of a domestic small

manufacturer. Specifically, an offeror that is not the manufacturer of

the product (1) must itself be a small business concern, and (2) must

also supply a product manufactured by a domestic small business

concern. This requirement is commonly referred to as the

``nonmanufacturer rule.'' SBA may waive the nonmanufacturer rule if one

of the following conditions exists: (1) SBA determines that no small

business manufacturer can reasonably be expected to offer a product

meeting the specifications required by a solicitation (individual

waiver); or (2) SBA determines that no small business manufacturer of

an item is available to participate in the federal market generally

(class waiver).

On May 26, 1995 SBA published in the Federal Register (60 FR 27924)

a proposed rule that would require a small business dealer or

nonmanufacturer to provide the product of a small manufacturer on all

small business set-aside or section 8(a) supply contracts over $2,500,

including those processed under SAP. This proposed rule was not

finalized, and the comments received by SBA and further study of the

issue persuaded SBA that the May 26th proposed rule should not be

adopted as final. As indicated above, the section in the November 24th

proposed rule dealing with this issue resulted in only two comments.

SBA has decided to finalize the rule as proposed on November 24th. In

order to set forth its reasoning on this matter, SBA discusses below

the comments earlier received in response to its May 26th proposed

rule.

SBA's May 26th proposed rule would have extended the

nonmanufacturer rule to all procurements processed under the SAP

established by the Federal Acquisition Streamlining Act (FASA) of 1994.

SBA offered two alternatives to this proposal, and invited comments on

both along with the proposal. SBA's first alternative was to exempt

from the nonmanufacturer rule contracts of $100,000 or less. The second

alternative was to exempt contracts of $25,000 or less. (Contracts

below the micro-purchases level of $2,500 would be exempt regardless of

the approach in the proposed rule or either alternative.) This second

alternative was the one proposed as part of SBA's November 24, 1995

proposed revision to the entire Part 121.

After considering the forty comments received in response to the

May 26th proposed rule, as well as the two received in response to the

November 24th proposed rule, SBA has concluded that applying the

nonmanufacturer rule to all procurements reserved for small business,

including those handled under SAP, would place inappropriate and

substantial administrative burdens on a great number of small-dollar

value contracts. Given the large volume of contracts of $25,000 or less

(98 percent of procurement actions), contracting officers would likely

experience burdensome delays in order to identify small manufacturer

sources and to verify that small dealers were supplying the product of

domestic small manufacturers. The likely significant increase in

requests for waivers of the nonmanufacturer rule would overly burden

contracting agencies and the SBA, creating further delays in the

procurement process. SBA also has concluded that adoption of the

proposed rule could have an undesirable effect of diminishing

opportunities for small dealers in the federal market. For many

products purchased in small-dollar quantities, there often appears to

be few or no small business manufacturers participating in the federal

market. Consequently, many dealers who have been supplying the federal

government with products on contracts of $25,000 or less would, under

the May 26th proposed rule, not be eligible for an award of a set-aside

contract since they do not have or could not obtain products of a small

manufacturer.

At the same time, SBA strongly believes that an exemption from the

nonmanufacturer rule for contracts greater than $25,000 would have a

substantial damaging effect on domestic small manufacturers. In fiscal

years 1991 through 1993, small manufacturers averaged over $500 million

in set-aside and 8(a) contracts ranging between $25,000 and $100,000.

An exemption from the nonmanufacturer rule for these procurements would

potentially shift much of this contracting from small to large

manufacturers, and would defeat the very purpose of the nonmanufacturer

rule.

The selection of the $25,000 level for applying the nonmanufacturer

rule to contracts reserved for small business is consistent with the

threshold formerly established for small purchase procedures

(discontinued under FASA) and balances the important objectives of

simplifying the procurement process with continuing to ensure that most

of the benefits of procurements reserved for small business actually

flow to small business. Utilizing this threshold of $25,000 will

continue the level of competition between small and large manufacturers

that existed under small purchase procedures. A higher threshold would

introduce a new level of competition that would adversely affect small

manufacturing enterprises. At the same time, small business dealers

will continue to have the same level of contract opportunities at

$25,000 and below that they formerly had under small purchase

procedures. That is, they will continue to be able to provide the

products of large manufacturers on procurements of $25,000 or less.

Selecting this threshold will add no new requirements to the vast

majority of smaller-sized procurements.

SBA received 40 comments in response to the May 26th proposed rule.

Of the 40 comments, ten were from federal contracting activities, one

from a State University Economic Development Institute (EDI), 28 from

businesses (27 dealers and 1 manufacturer), and one was from a trade

association. All but one of the commenters opposed applying the

nonmanufacturer rule as the May 26th rule proposed to do. The one, a

federal contracting activity, indicated its commitment to supporting

the rule however implemented. Thirty-six commenters supported the first

alternative of the proposed rule (a $100,000 threshold), and three

indicated some support for the second alternative (a $25,000

threshold).

The ten federal contracting activities and one EDI that commented

on the proposed rule favored exempting procurements of $100,000 or less

from the nonmanufacturer rule. They believe that applying the rule to

all procurements reserved for small business will place additional

administrative burdens on contracting personnel, which is contrary to

the intent of FASA. They pointed out that the proposed policy could

result in a reluctance on the part of some contracting personnel to set

aside procurements for small business, thus actually reducing small

business participation and increasing government costs because of

lessened cost competitiveness. They also anticipated a need to request

more waivers, causing administrative burdens and processing delays at

the SBA. Two of the federal contracting activities indicated that they

would support retaining the $25,000 threshold as a practical

alternative to requiring the application of the nonmanufacturer rule to

all contracts over $2,500. The EDI's comments, while supporting some of

the above, more fully describe the effects of the proposed rule upon

small dealers and distributors. (SBA addresses the effects upon dealers

later in this discussion.)

SBA recognizes that these points are legitimate concerns of federal

procurement personnel with regard to

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the proposed rule. Therefore, SBA has decided that the nonmanufacturer

rule shall apply only to those contracts set aside for small business

that are above $25,000. The exemption from the nonmanufacturer rule for

contracts processed under small purchase procedures of $25,000 and

below had proven quite workable in the past. SBA agrees that

establishing a $100,000 threshold for the nonmanufacturer rule would

certainly further simplify the procurement process and reduce the

administrative burden on contracting officers. However, this

administrative relief would come at significant expense to domestic

small manufacturers who have traditionally provided products in

response to procurements set aside for small business. With this final

rule, administrative burdens will be no more and no less than they had

been under small purchase procedures. Also, small business set-aside

opportunities would not be diminished as a result of extending the

nonmanufacturer rule to previously exempted procurements. SBA has

concluded that the adverse effect of a $100,000 threshold upon such a

significant part of the market for small manufacturers is not

appropriate, and that the $25,000 threshold strikes a proper balance

with the FASA goal of reducing administrative matters associated with

federal procurement.

To alleviate the potential delays in the procurement process by

applying the nonmanufacturer rule to procurements reserved for small

business, two federal contracting activities recommended that SBA

delegate waiver authority to contracting officers for these

procurements. The SBA does not agree with this recommendation.

Delegating this decision to literally thousands of contracting offices

would likely lead to an inconsistent application of the nonmanufacturer

rule. However, to address concerns regarding delays in the procurement

process, SBA will attempt to complete the processing of individual

waiver requests in connection with procurements processed under

simplified acquisition procedures within five (5) business days of the

receipt of a complete waiver request instead of the normal fifteen (15)

business days. Generally, a contracting office submits, and SBA

processes, a waiver request before it issues its solicitation. The

markedly reduced time involved should lessen significantly any direct

negative impact on small manufacturers or dealers or on the procurement

process.

All but one of the 28 business commenters and the sole trade

association commenting are associated with one affected industry,

namely military surplus aircraft parts, and all supported the adoption

of the $100,000 threshold. Firms in this industry purchase at auction

military surplus aircraft parts from the Department of Defense (DoD),

inventory them, and resell them to U.S. and friendly foreign military

services. Items they purchase are generally new and unused, and are

products almost exclusively of large manufacturers. As suppliers of

products they do not manufacture, they would be unable to compete on

small business set-aside and section 8(a) procurements if the

nonmanufacturer rule were applicable.

Uniformly these commenters favored adoption of the alternative that

would establish a $100,000 threshold instead of the proposed rule. They

stated that the May 26, 1995 proposal to apply the nonmanufacturer rule

to all procurements reserved for small business would harm small

dealers of military surplus aircraft parts by effectively rendering

them unable to compete on most procurements reserved for small

business. This diminished opportunity to compete would result because

there are few DoD approved small manufacturers of military aircraft

parts, and most procurements are below the $100,000 simplified

acquisition threshold. With few or no small manufacturers to supply

products for these dealers, more federal solicitations would likely

become open and unrestricted. On unrestricted procurements, these

dealers believe they are at a competitive disadvantage when placed into

direct competition with the same large manufacturers whose products

they would propose to supply. Therefore, they believe such an

application of the nonmanufacturer rule would in fact harm small

businesses, and benefit large defense contractors.

SBA shares the concern about the impact of the proposed rule on the

opportunities for small dealers in the federal market. As these

comments point out, as well as comments received from several of the

federal contracting activities, small dealers find it difficult to

comply with the nonmanufacturer rule on small-dollar contracts due to

the limited number of small manufacturer sources. To address this

concern, the final rule re-establishes an exemption of the

nonmanufacturer rule on contracts of $25,000 or less. The SBA, however,

does not believe that a higher threshold is in the best interests of

all small businesses.

As stated in this final rule as well as the May 26th proposed rule,

SBA is particularly concerned about the impact on small business

manufacturers of an exemption to the nonmanufacturer rule.

Participation of small business in the federal procurement of aircraft

parts offers an excellent example of the reasons for the SBA's

concerns. In fiscal year 1993, small manufacturers of aircraft parts

received direct awards of over $20 million in set-aside and 8(a)

contracts that ranged between $25,000 and $100,000. (This figure does

not include set-aside and 8(a) contracts for products that small

manufacturers provided through small dealers.) An exemption of the

nonmanufacturer rule to small business set-aside procurements between

$25,000 and $100,000 could significantly reduce the opportunities for

small business manufacturers. The SBA has found that a number of other

industries would be affected in a similar manner if the $100,000

threshold were adopted. In recognition of the business practices of

small dealers in the federal market, while at the same time protecting

opportunities for small manufacturers and ensuring that the substantial

value of small business set-asides flow to small business, the SBA

believes that this final rule is in the overall best interest of small

business.

The commenting membership of the association of dealers in military

surplus aircraft parts also emphasized the unique character of their

commodity, and they requested that it be treated as such. As a minimum

alternative to the proposed rule, they requested that SBA grant a class

waiver for military aircraft spare parts. As a response to this

alternative, the Agency notes that Secs. 121.1201-121.1205 of this

final rule provide the policies and procedures that apply to all class

waivers of the nonmanufacturer rule. SBA will consider a request for a

class waiver for military surplus aircraft parts that is submitted with

adequate support in accordance with the procedures laid out in the

preceding reference.

The only business commenter not associated with the military

surplus aircraft parts industry believes that the proposed rule would

be inconsistent with U.S. policy regarding free trade barriers with its

global trading partners. SBA disagrees. In accordance with the General

Agreement on Tariffs and Trade, the North American Free Trade Agreement

and the Canadian Free Trade Agreement, governments may establish

procurement preference programs to assist small business, and this rule

pertains to policies concerning the eligibility of business concerns

who may participate in U.S. small business procurement programs.

SBA received three comments to Sec. 121.603 of the November 24th

proposed rule. The first comment

[[Page 3285]]

recommended that the section be revised to include the time at which

size is determined for specific 8(a) subcontracts, believing that SBA

must have inadvertently omitted this requirement from the November 24th

proposed rule. That requirement was not omitted from the proposed rule,

but, rather, appeared in proposed Sec. 121.404. Proposed Sec. 121.401

stated that the requirements set forth in Secs. 121.401-121.412 applied

to procurement programs including SBA's Minority Enterprise Development

(i.e., the 8(a)) program. Proposed Sec. 121.404 set forth the time at

which size is determined for these procurement programs. While the time

at which size is determined for 8(a) subcontracts continues to be

contained in Sec. 121.404, the final rule adds a cross reference in

Sec. 121.603 to Sec. 121.404 for clarification.

The second comment believed that notification of size verification

by SBA (proposed Sec. 121.603(b)) is an unnecessary burden on SBA. SBA

believes that such notification is needed to ensure fairness and the

integrity of the program, and that any self-imposed burden is

outweighed by this benefit.

The last comment suggested that Sec. 121.603(c) be eliminated as

unnecessary and redundant. This provision does not appear elsewhere in

Part 121, and SBA believes that it is needed within the size provisions

specifically relating to the 8(a) program.

As part of the supplementary information to the November 24, 1995

proposed rule, SBA published a table of statutory and regulatory size

standards established by agencies other than SBA. That table is not

repeated in this final rule. Anyone with an interest in size standards

established by other agencies for specific programs within their

authority should consult the table published with the proposed rule. 60

FR 57982, 57988.

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 believes that this final rule will have a significant impact on

a substantial number of small entities within the meaning of the

Regulatory Flexibility Act, 5 U.S.C. 601, et seq. In addition, this

rule constitutes a significant regulatory action for the purpose of

Executive Order 12866. A regulatory assessment and a regulatory

flexibility analysis follow:

(1) Description of Entities to Which This Rule Applies

This rule will primarily apply to small business nonmanufacturers

(wholesale trade and retail trade firms) and will allow them to furnish

the product of any manufacturer on procurements of $25,000 or less.

Also, small business manufacturers will have to compete on certain

procurements with small nonmanufacturers supplying products of large

manufacturers. The lack of detailed data on contracts of $25,000 or

less precludes an estimate of the number of small nonmanufacturers and

small manufacturers this rule will affect. However, comments on the

proposed rule suggest that a significantly greater number of small

nonmanufacturers will be impacted by this rule than small

manufacturers.

(2) Description of Potential Benefits of This Rule

The benefits of this rule are threefold. First, small business

nonmanufacturers will maintain the same procurement opportunities for

contracts of $25,000 and below as they had under small purchase

procedures. Although the amount of contracting cannot be estimated, it

does represent a significant proportion of the $7.9 billion awarded to

small businesses under small purchase procedures in FY 1993. Second,

small manufacturers will have the same or greater level of procurement

opportunities under the simplified acquisition threshold as they had

under small business set-aside and 8(a) procurements of $25,000 to

$100,000. As discussed in the proposed rule, small manufacturers have

received over $500 million annually in set-aside and 8(a) contracts

within this dollar range. Finally, administrative burdens to small

nonmanufacturers and contracting officers will be reduced since there

will be no need to determine the size status of a manufacturing source

on thousands of small-dollar contracts.

(3) Description of Potential Costs of This Rule

SBA believes there will be minimal costs to the federal government

by reserving procurements of $25,000 or less to small nonmanufacturers.

All small business set-aside and section 8(a) contracts are expected to

be awarded at no more than fair-market value. Contracting officers, who

determine that on a given procurement there will not be two or more

small businesses competitive in market price, quality and delivery, may

issue an unrestricted procurement. Therefore, there should be no

significant increased costs to the government.

(4) Description of the Potential Net Benefits of the Rule

SBA believes that the benefits to small business exceed any costs

to federal procurement as a result of this final rule. In the May 26th

proposed rule, SBA expressed its belief that small business

opportunities would be greater if small nonmanufacturers were required

to supply the product of a domestic small business manufacturer. In

light of the comments received, SBA has concluded that small

nonmanufacturers participate much more significantly in small-dollar

procurements than do small manufacturers. Thus, the net benefits of

this final rule to small dealers, in terms of federal contracting

opportunities for small business, would be substantially greater than

the net benefits to small manufacturers from the proposed rule.

(5) Legal Basis for This Rule

The legal basis for this rule is sections 3(a), 5(a), 8(a) and

15(a) of the Small Business Act, 15 U.S.C. 632(a), 634(b)(6), 637(a)

and 644(a).

(6) Federal Rules

There are no federal rules that duplicate, overlap or conflict with

this final rule. SBA has exclusive statutory jurisdiction in

establishing size standards. In establishing the $100,000 threshold for

simplified acquisition procedures under which all procurements are

reserved exclusively for small business, FASA did not address the

application of the nonmanufacturer rule.

(7) Significant Alternatives to This Rule

In compliance with the Regulatory Flexibility Act, SBA considered

two alternatives in its proposed rule of May 26, 1995. One alternative

is the proposed rule itself, which would have the nonmanufacturer rule

apply to all small business set-aside and section 8(a) procurements

over $2,500. In proposing that rule, SBA offered and requested comments

on two alternatives. The proposed rule, together with the alternatives,

are discussed in the ``Supplementary Information,'' above. SBA has

concluded for the reasons more fully presented above to adopt the

second alternative.

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

certifies that this final rule contains no new reporting or

recordkeeping requirements.

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

does

[[Page 3286]]

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, 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 revises 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''?

121.108 What are the penalties for misrepresentation of size

status?

Size Standards Used to Define Small Business Concerns

121.201 What size standards has SBA identified by Standard

Industrial Classification codes?

Size Eligibility Requirements for SBA Financial Assistance

121.301 What size standards are applicable to financial assistance

programs?

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

121.303 What size procedures are used by SBA before it makes a

formal size determination?

121.304 What are the size requirements for refinancing an existing

SBA loan?

121.305 What size eligibility requirements exist for obtaining

business loans relating to particular procurements?

Size Eligibility Requirements for Government Procurement

121.401 What procurement programs are subject to size

determinations?

121.402 What size standards are applicable to procurement

assistance programs?

121.403 Are SBA size determinations and SIC code designations

binding on parties?

121.404 When does SBA determine the size status of a business

concern?

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

status?

121.406 How does a small business concern qualify to provide

manufactured products under small business set-aside or MED

procurements?

121.407 What are the size procedures for multiple item

procurements?

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

Competency Program?

121.409 What size standard applies in an unrestricted procurement

for Certificate of Competency purposes?

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

Subcontracting Program?

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

Subcontracting Program?

121.412 What are the size procedures for partial small business

set-asides?

Size Eligibility Requirements for Sales or Lease of Government Property

121.501 What programs for sales or leases of Government property

are subject to size determinations?

121.502 What size standards are applicable to programs for sales or

leases of Government property?

121.503 Are SBA size determinations binding on parties?

121.504 When does SBA determine the size status of a business

concern?

121.505 What is the effect of a self-certification?

121.506 What definitions are important for sales or leases of

Government-owned timber?

121.507 What are the size standards and other requirements for the

purchase of Government-owned timber (other than Special Salvage

timber)?

121.508 What are the size standards and other requirements for the

purchase of Government-owned Special Salvage Timber?

121.509 What is the size standard for leasing of Government land

for coal mining?

121.510 What is the size standard for leasing of Government land

for uranium mining?

121.511 What is the size standard for buying Government-owned

petroleum?

121.512 What is the size standard for stockpile purchases?

Size Eligibility Requirements for the Minority Enterprise Development

(MED) Program

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

Minority Enterprise Development (MED) Program?

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

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

particular MED subcontract?

121.604 Are MED Participants considered small for purposes of other

SBA assistance?

Size Eligibility Requirements for the Small Business Innovation

Research (SBIR) Program

121.701 What SBIR programs are subject to size determinations?

121.702 What size standards are applicable to the SBIR programs?

121.703 Are formal size determinations binding on parties?

121.704 When does SBA determine the size status of a business

concern?

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

Size Eligibility Requirements for Paying Reduced Patent Fees

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

121.802 What size standards are applicable to the 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 size 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?

[[Page 3287]]

Subpart B--Other Applicable Provisions

Waivers of the Nonmanufacturer Rule for Classes of Products and

Individual Contracts

121.1201 What is the Nonmanufacturer Rule?

121.1202 When will a waiver of the Nonmanufacturer Rule be granted

for a class of products?

121.1203 When will a waiver of the Nonmanufacturer Rule be granted

for an individual contract?

121.1204 What are the procedures for requesting and granting

waivers?

121.1205 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.

Subpart A--Size Eligibility Provisions and Standards

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, previous

relationships with or ties to another concern, 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, 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 an 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 is not

affiliated with the investors listed in paragraphs (b)(5)(i) through

(vi) of this section if the investors do not control the concern except

under those circumstances set forth in Sec. 107.865(c) or (d) of this

chapter. For purposes of this paragraph (b)(5), ``control'' is

determined 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 any state, or 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, as amended (29 U.S.C.

1001, et seq.);

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

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

of the Internal Revenue Code of 1986, as amended (26 U.S.C. 501(c));

(v) Investment companies registered under the Investment Company

Act of 1940, as amended (1940 Act) (15 U.S.C. 80a-1, et seq.); and

(vi) Investment companies, as defined under the 1940 Act, which are

not registered under the 1940 Act because they are beneficially owned

by less than 100 persons, if the company's sales literature or

organizational documents indicate that its principal purpose is

investment in securities rather than the operation of commercial

enterprises.

(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.

[[Page 3288]]

(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 ``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 franchisee or

licensee 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 means ``total income'' (or in the case of a sole

proprietorship, ``gross income'') plus the ``cost of goods sold'' as

these terms are defined or reported on Internal Revenue Service (IRS)

Federal tax return forms (Form 1120 for corporations; Form 1120S for

Subchapter S corporations; Form 1065 for partnerships; and Form 1040,

Schedule F for farm or Schedule C for other sole proprietorships).

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

[[Page 3289]]

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 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 size standards themselves are

expressed either in number of employees or annual receipts in millions

of dollars, 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 for a specific

two-digit major group or four-digit industry code. The industry code

applicable to an industry that cannot be otherwise classified will be

SIC code 9999, Nonclassifiable Establishments, with a corresponding

size standard of $5.0 million in annual receipts.

Size Standards by SIC Industry

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

Size standards in number of

SIC code and description employees or millions of

dollars

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

DIVISION A--AGRICULTURE

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

MAJOR GROUP 01--AGRICULTURAL PRODUCTION $0.5

CROPS.

MAJOR GROUP 02--LIVESTOCK AND ANIMAL $0.5

SPECIALTIES.

Except:

0211 Beef Cattle Feedlots (Custom).... $0.5

0252 Chicken Eggs..................... $9.0

MAJOR GROUP 07--AGRICULTURAL SERVICES...... $5.0

MAJOR GROUP 08--FORESTRY................... $5.0

MAJOR GROUP 09--FISHING, HUNTING, AND $3.0

TRAPPING.

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

DIVISION B--MININ

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

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, $5.0

N.E.C..

1481 Nonmetallic Minerals Services, $5.0

Except Fuels.

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

DIVISION C--CONSTRUCTION

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

MAJOR GROUP 15--GENERAL BUILDING $17.0

CONTRACTORS.

MAJOR GROUP 16--HEAVY CONSTRUCTION, NON $17.0

BUILDING.

EXCEPT:

1629 (Part) Dredging and Surface $13.5 \1\

Cleanup Activities.

MAJOR GROUP 17--CONSTRUCTION--SPECIAL TRADE $7.0

CONTRACTORS.

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

DIVISION D--MANUFACTURING,\2\.............. 500

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

EXCEPT:

2032 Canned Specialties............... 1,000

[[Page 3290]]

2033 Canned Fruits, Vegetables, 500 \3\

Preserves, 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, 750

Margarine, 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 1,000

of 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, 750

Including Sanitary.

2812 Alkalies and Chlorine............ 1,000

2813 Industrial Gases................. 1,000

2816 Inorganic Pigments............... 1,000

2819 Industrial Inorganic Chemicals, 1,000

N.E.C.

2821 Plastics Materials, Synthetic 750

Resins, 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, 1,000

N.E.C..

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 750

and 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, 750

Except Steel.

3315 Steel Wiredrawing and Steel Nails 1,000

and Spikes.

3316 Cold-Rolled Steel Sheet, Strip, 1,000

and 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 750

of Copper.

3353 Aluminum Sheet, Plate, and Foil.. 750

3354 Aluminum Extruded Products....... 750

3355 Aluminum Rolling and Drawing, 750

N.E.C.

3356 Rolling, Drawing, and Extruding 750

of Nonferrous Metals, Except Copper

and Aluminum.

3357 Drawing and Insulating of 1,000

Nonferrous 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 750

Ware.

3482 Small Arms Ammunition............ 1,000

3483 Ammunition, Except for Small Arms 1,500

3484 Small Arms....................... 1,000

3511 Steam, Gas, and Hydraulic 1,000

Turbines, and Turbine Generator Set

Units.

[[Page 3291]]

3519 Internal Combustion Engines, 1,000

N.E.C.

3531 Construction Machinery and 750

Equipment.

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, 1,000

N.E.C.

3578 Calculating and Accounting 1,000

Machines, Except Electronic Computers.

3585 Air-Conditioning and Warm Air 750

Heating Equipment and Commercial and

Industrial Refrigeration Equipment.

3612 Power, Distribution, and 750

Specialty Transformers.

3613 Switchgear and Switchboard 750

Apparatus.

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 1,000

and Farm Freezers.

3633 Household Laundry Equipment...... 1,000

3634 Electronic Housewares and Fans... 750

3635 Household Vacuum Cleaners........ 750

3641 Electric Lamp Bulbs and Tubes.... 1,000

3651 Household Audio and Video 750

Equipment.

3652 Phonograph Records and 750

Prerecorded Audio Tapes and Disks.

3661 Telephone and Telegraph Apparatus 1,000

3663 Radio and Television Broadcasting 750

and 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 1,000

Media.

3699 Electrical Machinery, Equipment, 750

and Supplies, N.E.C.

3711 Motor Vehicles and Passenger Car 1,000

Bodies.

3714 Motor Vehicle Parts and 750

Accessories.

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 1,000

Nuclear Propelled Ships.

Shipbuilding of Nonnuclear 1,000

Propelled Ships and Nonpropelled

Ships.

Ship Repair (Including Overhauls 1,000

and Conversions) Performed on

Nonnuclear Propelled and

Nonpropelled Ships East of the 108

Meridian.

Ship Repair (Including Overhauls 1,000

and Conversion) Performed on

Nonnuclear Propelled and

Nonpropelled Ships West of the 108

Meridian.

3743 Railroad Equipment............... 1,000

3761 Guided Missiles and Space 1,000

Vehicles.

3764 Guided Missile and Space Vehicle 1,000

Propulsion Units and Propulsion Units

Parts.

3769 Guided Missile 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, 750

and 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 $5.0

AND INTERURBAN HIGHWAY AND PASSENGER

TRANSPORTATION.

MAJOR GROUP 42--MOTOR FREIGHT $18.5

TRANSPORTATION AND WAREHOUSING.

EXCEPT:

4212 (Part) Garbage and Refuse $6.0

Collection, 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, $5.0

N.E.C..

--Offshore Marine Water $20.5

Transportation Services.

[[Page 3292]]

MAJOR GROUP 45--TRANSPORTATION BY AIR...... 1500

EXCEPT:

4522 Air Transportation, Nonscheduled. 1500

--Offshore Marine Air $20.5

Transportation Services.

4581 Airports, Flying Fields, and $5.0

Airport Terminal Services.

MAJOR GROUP 46--PIPELINES, EXCEPT NATURAL 1500

GAS,.

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.

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 $21.0

Used).

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 Boys' 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 $6.5

Stores.

5812 (Part) Food Service, $15.0

Institutional.

5961 Catalog and Mail-Order Houses.... $18.5

5983 Fuel Oil Dealers................. $9.0

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

DIVISION H--FINANCE, INSURANCE, AND REAL $5.0

ESTATE.

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

EXCEPT:

6021-6082 National and Commercial $100 Million in assets \7\

Banks, Savings, Institutions and

Credit Unions.

6331 Fire, Marine, and Casualty 1,500

Insurance.

6515 (Part) Leasing of Building Space $15.0 \8\

to Federal Government by Owners.

6531 Real Estate Agents and Managers.. $1.5 \6\

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

DIVISION I--SERVICES....................... $5.0

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

EXCEPT:

[[Page 3293]]

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 Industries Launderers............ $10.0

7311 Advertising Agencies............. $5.0 \6\

7312 Outdoor Advertising Services..... $5.0 \6\

7313 Radio, Television, and $5.0 \6\

Publishers' 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 $18.0

Design.

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 Armord Car $9.0

Services.

7382 Security Systems Services........ $9.0

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 $5.0 \9\

Services, 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 (Part) Flight Training Services.. $18.5

8711 Engineering Services............. $2.5

Military and Aerospace Equipment $20.0

and 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 $2.5

Than Naval).

8713 Surveying Services............... $2.5

8721 Accounting, Auditing, and $6.0

Bookkeeping Services.

8731 Commercial Physical and 500 \10\

Biological 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 $5.0 \6\

Services.

8744 Facilities Support Management $5.0 \11\

Services.

Base Maintenance................... $20.0 \12\

Environmental Remediation Services. 500 \13\

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

Footnotes:

\1\ SIC code 1629--Dredging: To be considered small for purposes 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 section 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 (part): 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.

[[Page 3294]]

\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 Institutions

Examination 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 code 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.

(3) Research and development for guided missiles and space vehicles

includes evaluations 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).

\12\ SIC code 8744:

(1) If one of the activities of base maintenance, as defined in

paragraph (2) of this footnote, 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 codre 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 Requirements 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, tangible 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, tangible net worth not in excess of

$18 million, and average 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 accepted for processing 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.

[[Page 3295]]

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?

(a) A concern that applies to refinance an existing SBA loan or

guarantee will be considered small for the refinancing even though its

size has increased since the date of the original financing to exceed

its applicable size standard, provided that:

(1) The increase in size is due to natural growth (as distinguished

from merger, acquisition or similar management action); and

(2) SBA determines that refinancing is necessary to protect the

Government's financial interest.

(b) If a concern's size has increased other than by natural growth,

the concern and its affiliates must be small at the time the

application for refinancing is accepted for processing by SBA.

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 through 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 through 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

[[Page 3296]]

must be manufactured or produced in the United States); or

(2) Comply with the requirements of paragraph (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 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 ``class'' waivers and ``individual'' waivers

respectively, and the procedures for them are contained in

Sec. 121.1204 .

(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.

[[Page 3297]]

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 Sales Or Lease Of Government Property

Sec. 121.501 What programs for sales or leases of Government property

are subject to size determinations?

Sections 121.501 through 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 sales

or leases of Government property?

(a) Unless otherwise specified in this part--

(1) A concern primarily engaged in manufacturing is small for sales

or leases of Government property if it does not exceed 500 employees;

(2) A concern not primarily engaged in manufacturing is small for

sales or leases of Government property if it has annual receipts not

exceeding $2 million.

(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 in response to a request from another Government agency

under Sec. 121.901, are binding upon the parties. Other SBA opinions

provided to contracting officers or others are only advisory, and are

not binding or appealable.

Sec. 121.504 When does SBA determine the size status of a business

concern?

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 Government as part of its initial

offer including price where there is a specific sale or lease at issue,

or as set forth in Sec. 121.903 if made in response to a request of

another Government agency.

Sec. 121.505 What is the effect of a self-certification?

(a) A contracting officer may accept a concern's self-certification

as true for the particular sale or lease involved, in the absence of a

written protest by other offerors or other credible information which

would cause the contracting officer or SBA to question the size of the

concern.

(b) Procedures for protesting the self-certification of an offeror

are set forth in Secs. 121.1001 through 121.1009.

Sec. 121.506 What definitions are important for sales or leases of

Government-owned timber?

(a) Forest product industry means logging, wood preserving, and the

manufacture of lumber and wood related products such as veneer,

plywood, hardboard, particle board, or wood pulp, and of products of

which lumber or wood related products are the principal raw materials.

(b) Logging of timber means felling and bucking, yarding, and/or

loading. It does not mean hauling.

(c) Manufacture of logs means, at a minimum, breaking down logs

into rough cuts of the finished product.

(d) Sell means, in addition to its usual and customary meaning, the

exchange of sawlogs for sawlogs on a product-for-product basis with or

without monetary adjustment, and an indirect transfer, such as the sale

of the assets of a concern after it has been awarded one or more set-

aside sales of timber.

(e) Significant logging of timber means that a concern uses its own

employees to perform at least two of the following: felling and

bucking, yarding, and loading.

Sec. 121.507 What are the size standard and other requirements for the

purchase of Government-owned timber (other than Special Salvage

Timber)?

(a) To be small for purposes of the sale of Government-owned timber

(other than Special Salvage Timber) a concern must:

(1) Be primarily engaged in the logging or forest products

industry;

(2) Not exceed 500 employees, taking into account its affiliates;

and

(3) If it does not intend at the time of the offer to resell the

timber--

(i) Agree that it will manufacture the logs with its own facilities

or those of another business which meets the requirements of paragraphs

(a)(1) and (a)(2) of this section;

(ii) Agree that if it eventually resells the timber, it will resell

no more than 30% of the sawtimber volume to other businesses which do

not meet the requirements of paragraphs (a)(1) and (a)(2) of this

section; and

(iii) Agree that if it becomes acquired or controlled by a business

which does not meet the requirements of paragraphs (a)(1) and (a)(2) of

this section, it will require as a condition of the acquisition or

change of control that the acquiring or controlling business resell at

least 70% of the sawtimber volume to businesses which do meet the

requirements of paragraphs

(a)(1) and (a)(2) of this section; or

(4) If it intends at the time of offer to resell the timber--

(i) Agree that it will not sell more than 30% of such timber (50%

of such timber if the concern is an Alaskan business) to a business

which does not meet the requirements of paragraphs (a)(1) and (a)(2) of

this section; and

(ii) Agree that if it becomes acquired or controlled by a business

which does not meet the requirements of paragraphs (a)(1) and (a)(2) of

this section, it will require as a condition of the acquisition or

change of control that the acquiring or controlling business resell at

least 70% of the sawtimber volume (or at least 50% of the sawtimber

volume, if it is an Alaskan business) to businesses which meet the

requirements of paragraphs (a)(1) and (a)(2) of this section.

(b) For a period of three years following the date upon which a

concern purchases timber under a small business set-aside (other than

through the Special Salvage Timber Sale program), it must maintain a

record of:

(1) The name, address and size status of every concern to which it

sells the timber or sawlogs; and

[[Page 3298]]

(2) The species, grades and volumes of sawlogs sold.

(c) For a period of three years following the date upon which a

concern purchases timber, it must by contract require all small

business repurchasers of the sawlogs or timber it purchased under the

small business set-aside to maintain the records described in paragraph

(b) of this section.

Sec. 121.508 What are the size standard and other requirements for the

purchase of Government-owned Special Salvage Timber?

(a) In order to purchase Government-owned Special Salvage Timber

from the United States Forest Service or the Bureau of Land Management

as a small business, a concern must:

(1) Be primarily engaged in the logging or forest product industry;

(2) Have, together with its affiliates, no more than twenty-five

employees during any pay period for the last twelve months; and

(3) If it does not intend at the time of offer to resell the

timber--

(i) Agree that it will manufacture a significant portion of the

logs with its own employees; and

(ii) Agree that it will log the timber only with its own employees

or with employees of another business which is eligible for award of a

Special Salvage Timber sales contract; or

(4) If it intends at the time of offer to resell the timber, agree

that it will perform a significant portion of timber logging with its

own employees and that it will subcontract the remainder of the timber

logging to a concern which is eligible for award of a Special Salvage

Timber sales contract.

Sec. 121.509 What is the size standard for leasing of Government land

for coal mining?

A concern is small for this purpose if it:

(a) Together with its affiliates, does not have more than 250

employees;

(b) Maintains management and control of the actual mining

operations of the tract; and

(c) Agrees that if it subleases the Government land, it will be to

another small business, and that it will require its sublessors to

agree to the same.

Sec. 121.510 What is the size standard for leasing of Government land

for uranium mining?

A concern is small for this purpose if it, together with its

affiliates, does not have more than 100 employees.

Sec. 121.511 What is the size standard for buying Government-owned

petroleum?

A concern is small for this purpose if it is primarily engaged in

petroleum refining and meets the size standard for a petroleum refining

business.

Sec. 121.512 What is the size standard for stockpile purchases?

A concern is small for this purpose if:

(a) It is primarily engaged in the purchase of materials which are

not domestic products; and

(b) Its annual receipts, together with its affiliates, do not

exceed $42 million.

Size Eligibility Requirements for the Minority Enterprise Development

(MED) Program

Sec. 121.601 What is a small business for purposes of admission to

SBA's Minority Enterprise Development (MED) program?

An applicant must be small under the size standard corresponding to

its primary industry classification in order to be admitted to SBA's

Minority Enterprise Development (MED) program.

Sec. 121.602 At what point in time must a MED applicant be small?

A MED applicant must be small for its primary industry at the time

SBA certifies it for admission into the program.

Sec. 121.603 How does SBA determine whether a Participant is small for

a particular MED subcontract?

(a) Self certification by Participant. A MED Participant must

certify that it qualifies as a small business under the SIC code

assigned to a particular MED subcontract as part of its initial offer

including price to the procuring agency. The Participant also must

submit a copy of its offer, including its self-certification as to

size, to the appropriate SBA district office at the same time it

submits the offer to the procuring agency. See Sec. 121.404 for the

time at which size is determined for, and Sec. 121.406 for the

applicability of the nonmanufacturer rule to, MED procurements.

(b) Verification of size by SBA. Within 30 days of its receipt of a

Participant's size self-certification for a particular MED subcontract,

the SBA district office serving the geographic area in which the

Participant's principal office is located will review the Participant's

self-certification and determine if it is small for purposes of that

subcontract. The SBA district office will review the Participant's most

recent financial statements and other relevant data and then notify the

Participant of its decision.

(c) Changes in size between date of self-certification and date of

award. (1) Where SBA verifies that the selected Participant is small

for a particular procurement, subsequent changes in size up to the date

of award, except those due to merger with or acquisition by another

business concern, will not affect the firm's size status for that

procurement.

(2) Where a Participant has merged with or been acquired by another

business concern between the date of its self-certification and the

date of award, the concern must recertify its size status, and SBA must

verify the new certification before award can occur.

(d) Finding Participant to be other than small. (1) A Participant

may request a formal size determination (pursuant to Secs. 121.1001

through 121.1009) with the SBA Government Contracting Area Office

serving the geographic area in which the principal office of the

Participant is located within 5 working days of its receipt of notice

from the SBA district office that it is not small for a particular MED

subcontract.

(2) Where the Participant does not timely request a formal size

determination, SBA may accept the procurement in support of another

Participant, or may rescind its acceptance of the offer for the MED

program, as appropriate.

Sec. 121.604 Are MED Participants considered small for purposes of

other SBA assistance?

A concern which SBA determines to be a small business for the award

of a MED subcontract will be considered to have met applicable size

eligibility requirements of other SBA programs where that assistance

directly and primarily relates to the performance of the MED

subcontract in question.

Size Eligibility Requirements for the Small Business Innovation

Research (SBIR) Program

Sec. 121.701 What SBIR programs are subject to size determinations?

(a) These sections apply to size status for award of a funding

agreement pursuant to the Small Business Innovation Development Act of

1982 (Pub. L. 97-219, 15 U.S.C. 638(e) through (k)).

(b) Funding agreement officer means a contracting officer, a grants

officer, or a cooperative agreement officer.

(c) Funding agreement means any contract, grant or cooperative

agreement entered into between any Federal agency and any small

business for the performance of experimental, developmental, or

research work funded in whole or in part by the Federal Government.

Such work includes:

(1) A systematic, intensive study directed toward greater knowledge

or understanding of the subject studied;

[[Page 3299]]

(2) A systematic study directed specifically toward applying new

knowledge to meet a recognized need; or

(3) A systematic application of knowledge toward the production of

useful materials, devices, and systems or methods, including design,

development, and improvement of prototypes and new processes to meet

specific requirements.

Sec. 121.702 What size standards are applicable to the SBIR program?

To be eligible to compete for award of funding agreements in SBA's

Small Business Innovation Research (SBIR) program, a business concern

must:

(a) Be at least 51 percent owned and controlled by one or more

individuals who are citizens of, or permanent resident aliens in, the

United States; and

(b) Not have more than 500 employees, including its affiliates.

Sec. 121.703 Are formal size determinations binding on parties?

Size determinations by authorized SBA officials are formal actions

based upon a specific funding agreement, and are binding upon the

parties. Other SBA opinions provided to funding agreement officers or

others, are only advisory, and are not binding or appealable.

Sec. 121.704 When does SBA determine the size status of a business

concern?

The size status of a concern for the purpose of a funding agreement

under the SBIR program is determined as of the date of the award for

both Phase I and Phase II SBIR awards.

Sec. 121.705 Must a business concern self-certify its size status?

(a) A firm must self-certify it is small in its SBIR funding

proposal.

(b) A funding agreement officer may accept a concern's self-

certification as true for the particular funding agreement involved in

the absence of a written protest by other offerors or other credible

information which would cause the funding agreement officer or SBA to

question the size of the concern.

(c) Procedures for protesting an offeror's self-certification are

set forth in Secs. 121.1001 through 121.1009.

Size Eligibility Requirements For Paying Reduced Patent Fees

Sec. 121.801 May patent fees be reduced if a concern is small?

These sections apply to size status for the purpose of paying

reduced patent fees authorized by Pub. L. 97-247, 96 Stat. 317. The

eligibility requirements for independent inventors and nonprofit

organizations for the purpose of paying reduced patent fees are set

forth in regulations of the Patent and Trademark Office of the

Department of Commerce, 37 CFR 1.9, 1.27, 1.28.

Sec. 121.802 What size standards are applicable to reduced patent fees

programs?

A concern eligible for reduced patent fees is one:

(a) Whose number of employees, including affiliates, does not

exceed 500 persons; and

(b) Which has not assigned, granted, conveyed, or licensed (and is

under no obligation to do so) any rights in the invention to any person

who made it and could not be classified as an independent inventor, or

to any concern which would not qualify as a non-profit organization or

a small business concern under this section.

Sec. 121.803 Are formal size determinations binding on parties?

Size determinations by authorized SBA officials are formal actions,

based upon a specific patent application pursuant to the rules of the

Patent and Trademark Office, Department of Commerce, and are binding

upon the parties. Other SBA opinions provided to patent applicants or

others are only advisory, and are not binding or appealable.

Sec. 121.804 When does SBA determine the size status of a business

concern?

Size status is determined as of the date of the patent applicant's

written verification of size.

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

(a) A concern verifies its size status with its submission of its

patent application.

(b) Any attempt to establish small size status improperly

(fraudulently, through gross negligence, or otherwise) may result in

remedial action by the Patent and Trademark Office.

(c) In the absence of credible information indicating otherwise,

the Patent and Trademark Office may accept the verification by the

concern as a small business as true.

(d) Questions concerning the size verification are resolved

initially by the Patent and Trademark Office. If not verified as small,

the applicant may request a formal SBA size determination.

Size Eligibility Requirements for Compliance With Programs of Other

Agencies

Sec. 121.901 Can other Government agencies obtain SBA size

determinations?

Upon request by another Government agency, SBA will provide a size

determination, under SBA rules, standards and procedures, for its use

in determining compliance with small business requirements of its

statutes, regulations or programs.

Sec. 121.902 What size standards are applicable to programs of other

agencies?

(a) SBA size standards. The size standards for compliance with

programs of other agencies are those for SBA programs which are most

comparable to the programs of such other agencies, unless otherwise

agreed by the agency and SBA.

(b) Special size standards. (1) Federal agencies or departments

promulgating regulations relating to small businesses usually use SBA

size criteria. In limited circumstances, if they decide the SBA size

standard is not appropriate, then agency heads may establish a small

business definition for the exclusive use of such program which is more

appropriate, but only when:

(i) The size standard is first proposed for public comment pursuant

to the Administrative Procedure Act, 4 U.S.C. 553;

(ii) The proposed size standard provides for determining size

measured by average number of employees over 12 months for

manufacturing concerns, average annual revenues over three years for

concerns providing services, and data over a period of not less than

three years for all other concerns (unless approved by SBA, ``annual

receipts'' and ``number of employees'' must be determined in accordance

with Secs. 121.104 and 121.106, respectively); and

(iii) The proposed size standard is approved by SBA's

Administrator.

(2) In order to receive the approval of SBA's Administrator, the

agency head must:

(i) Request approval prior to publishing the proposed rule

containing the size standard. The request must include: an explanation

of the contemplated industry size standard, the reasons the SBA size

standard is not appropriate, and the reasons the proposed size standard

would be appropriate; and a certification that there will be compliance

with the criteria set forth in paragraphs (b)(1)(i) and (b)(1)(ii) of

this section; and

(ii) Agree to provide written notice to SBA's Administrator prior

to publishing the contemplated size standard as a final rule. The

notice must include: a copy of the intended final rule, including the

preamble, or a separate written justification for the intended size

standard followed by a copy of the intended final rule and preamble

prior to its publication; copies of all public

[[Page 3300]]

comments relating to the size standard received in response to the

proposed rule; and any other supporting documentation relevant to the

size standard and requested by SBA's Administrator.

(3) When approving any size standard established pursuant to

subsection (b) of this section, SBA's Administrator will ensure that

the size standard varies from industry to industry to the extent

necessary to reflect the differing characteristics of the various

industries, and consider other relevant factors.

(4) Where the agency head is developing a size standard for the

sole purpose of performing a Regulatory Flexibility Analysis pursuant

to the Regulatory Flexibility Act, the department or agency may, after

consultation with the SBA Office of Advocacy, establish a size standard

different from SBA's which is more appropriate for such analysis.

Sec. 121.903 When does SBA determine the size status of a business

concern?

For the purpose of compliance with programs of other agencies, SBA

will base its size determination on the size of the concern as of the

date set forth in the request of the other agency.

Procedures for Size Protests and Requests for Formal Size

Determinations

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

size determination?

(a) Size Status Protests. (1) For SBA's Small Business Set-Aside

Program, including the Property Sales Program, the following entities

may file a size protest in connection with a particular procurement or

sale:

(i) Any offeror;

(ii) The contracting officer;

(iii) The SBA Government Contracting Area Director having

responsibility for the area in which the headquarters of the protested

offeror is located, regardless of the location of a parent company or

affiliates, or the Associate Administrator for Government Contracting;

and

(iv) Other interested parties. Other interested parties include

large businesses where only one concern submitted an offer for the

specific procurement in question. A concern found to be other than

small in connection with the procurement is not an interested party

unless there is only one remaining offeror after the concern is found

to be other than small.

(2) For SBA's Subcontracting Program, the following entities may

protest:

(i) The prime contractor;

(ii) The contracting officer;

(iii) Other potential subcontractors;

(iv) The responsible SBA Government Contracting Area Director or

the Associate Administrator for Government Contracting; and

(v) Other interested parties.

(3) For SBA's Small Business Innovation Research (SBIR) Program,

the following entities may protest:

(i) A prospective offeror;

(ii) The funding agreement officer;

(iii) The responsible SBA Government Contracting Area Director or

the Assistant Administrator for Technology; and

(iv) Other interested parties.

(4) For the Department of Defense's Small Disadvantaged Business

(SDB) Program, and any other similar program of another Federal agency,

the following entities may file a protest in connection with a

particular SDB procurement:

(i) Any offeror for the specific SDB requirement;

(ii) The contracting officer; and

(iii) The responsible SBA Government Contracting Area Director, the

Associate Administrator for Government Contracting, or the Associate

Administrator for MED.

(5) For any unrestricted Government procurement in which status as

a small business may be beneficial, including, but not limited to, the

award of a contract to a small business where there are tie bids, the

opportunity to seek a Certificate of Competency by a small business,

and SDB price evaluation preferences, the following entities may

protest in connection with a particular procurement:

(i) Any offeror;

(ii) The contracting officer; and

(iii) The responsible SBA Government Contracting Area Director, the

Associate Administrator for Government Contracting, or the Associate

Administrator for MED.

(b) Request for Size Determinations. (1) For SBA's Financial

Assistance Programs, the following entities may request a formal size

determination:

(i) The applicant for assistance; and

(ii) The SBA official with authority to take final action on the

assistance requested. That official may also request the appropriate

Government Contracting Area Office to determine whether affiliation

exists between an applicant for financial assistance and one or more

other entities for purposes of determining whether the applicant would

exceed the loan limit amount imposed by Sec. 120.151 of this chapter.

(2) For SBA's MED program--

(i) Concerning initial MED eligibility, the following entities may

request a formal size determination:

(A) The MED applicant concern; and

(B) The Director of the Division of Program Certification and

Eligibility or the Associate Administrator for MED.

(ii) Concerning individual 8(a) subcontract awards, whether sole

source or competitive, the following entities may request a formal size

determination:

(A) The MED concern nominated by SBA for the particular sole source

8(a) award or the apparent successful offeror for the particular

competitive 8(a) award;

(B) The SBA program official with authority to execute the 8(a)

subcontract; and

(C) The SBA District Director in the district serving the area in

which the headquarters of the MED concern is located, regardless of the

location of a parent company and affiliates, or the Associate

Administrator for MED.

(3) For SBA's Certificate of Competency Program, the following

entities may request a formal size determination:

(i) The offeror who has applied for a COC; and

(ii) The responsible SBA Government Contracting Area Director or

the Associate Administrator for Government Contracting.

(4) For SBA's sale or lease of government property, the following

entities may request a formal size determination:

(i) The responsible SBA Government Contracting Area Director or the

Associate Administrator for Government Contracting; and

(ii) Authorized officials of other Federal agencies administering a

property sales program.

(5) For eligibility to pay reduced patent fees, the following

entities may request a formal size determination:

(i) The applicant for the reduced patent fees; and

(ii) The Patent and Trademark Office.

(6) For purposes of determining compliance with small business

requirements of another Government agency program not otherwise

specified in this section, an official with authority to administer the

program involved may request a formal size determination.

Sec. 121.1002 Who makes a formal size determination?

The responsible Government Contracting Area Director or designee

makes all formal size determinations in response to either a size

protest or a request for a formal size determination, with the

exception of size determinations for purposes of the Disaster Loan

Program, which will be made by the Disaster Area Office Director or

designee responsible for the area in which the disaster occurred.

[[Page 3301]]

Sec. 121.1003 Where should a size protest be filed?

A protest involving a government procurement or sale must be filed

with the contracting officer for the procurement or sale, who must

forward the protest to the SBA Government Contracting Area Office

serving the area in which the headquarters of the protested concern is

located, regardless of the location of any parent company or

affiliates.

Sec. 121.1004 What time limits apply to protests?

(a) Protests by entities other than contracting officers or SBA.

(1) Non-negotiated procurement or sale. A protest must be received by

the contracting officer prior to the close of business on the 5th day,

exclusive of Saturdays, Sundays, and legal holidays, after bid or

proposal opening.

(2) Negotiated procurement. A protest must be received by the

contracting officer prior to the close of business on the 5th day,

exclusive of Saturdays, Sundays, and legal holidays, after the

contracting officer has notified the protestor of the identity of the

prospective awardee.

(3) Multiple award schedule. On a multiple award schedule

procurement set aside for small business, protests will be considered

timely if received by SBA at any time prior to the expiration of the

contract period (including renewals).

(b) Protests by contracting officers or SBA. The time limitations

in paragraph (a) of this section do not apply to contracting officers

or SBA, and they may file protests before or after awards, except to

the extent set forth in paragraph (e) of this section.

(c) Effect of contract award. A timely filed protest applies to the

procurement in question even though a contracting officer awarded the

contract prior to receipt of the protest.

(d) Untimely protests. A protest received after the allotted time

limits must still be forwarded to SBA. SBA will dismiss untimely

protests.

(e) Premature protests. A protest filed by any party, including the

contracting officer, before bid opening or notification to offerors of

the selection of the apparent successful offer will be dismissed as

premature.

Sec. 121.1005 How must a protest be filed with the contracting

officer?

A protest must be delivered to the contracting officer by hand,

telegram, mail, FAX, or telephone. If a protest is made by telephone,

the contracting officer must later receive a confirming letter either

within the 5-day period in Sec. 121.1004(a)(1) or postmarked no later

than one day after the date of the telephone protest.

Sec. 121.1006 When will a size protest be referred to an SBA

Government Contracting Area Office?

(a) A contracting officer who receives a protest (other than from

SBA) must forward the protest promptly to the SBA Government

Contracting Area Office serving the area in which the headquarters of

the offeror is located.

(b) A contracting officer's referral must contain the following

information:

(1) The protest and any accompanying materials;

(2) A copy of the self-certification as to size;

(3) Identification of the applicable size standard;

(4) A copy of the solicitation;

(5) Identification of the date of bid opening or notification

provided to unsuccessful offerors;

(6) The date on which the protest was received; and

(7) A complete address and point of contact for the protested

concern.

Sec. 121.1007 Must a protest of size status relate to a particular

procurement and be specific?

(a) Particular procurement. A protest challenging the size of a

concern which does not pertain to a particular procurement or sale will

not be acted on by SBA.

(b) A protest must include specific facts. A protest must be

sufficiently specific to provide reasonable notice as to the grounds

upon which the protested concern's size is questioned. Some basis for

the belief or allegation stated in the protest must be given. A protest

merely alleging that the protested concern is not small or is

affiliated with unnamed other concerns does not specify adequate

grounds for the protest. No particular form is prescribed for a

protest. Where materials supporting the protest are available, they

should be submitted with the protest.

(c) Non-specific protests will be dismissed. Protests which do not

contain sufficient specificity will be dismissed by SBA.

Sec. 121.1008 What happens after SBA receives a size protest or a

request for a formal size determination?

(a) When a size protest is received, the SBA Government Contracting

Area Director, or designee, will promptly notify the contracting

officer, the protested concern, and the protestor that a protest has

been received. In the event the size protest pertains to a requirement

involving SBA's SBIR Program, the Government Contracting Area Director

will advise the Assistant Administrator for Technology of the receipt

of the protest. SBA will provide a copy of the protest to the protested

concern along with a blank SBA Application for Small Business Size

Determination (SBA Form 355) by certified mail, return receipt

requested, or by any overnight delivery service that provides proof of

receipt. SBA will ask the protested concern to respond to the

allegations of the protestor.

(b) When SBA receives a request for a formal size determination in

accord with Sec. 121.1001(b), SBA will provide a blank copy of SBA Form

355 to the concern whose size is at issue.

(c) The protested concern or concern whose size is at issue must

return the completed SBA Form 355 and all other requested information

to SBA within 3 working days from the date of receipt of the blank form

from SBA. SBA has discretion to grant an extension of time to file the

form. The firm must attach to the completed SBA Form 355 its answers to

the allegations contained in the protest, where applicable, together

with any supporting material.

(d) If a concern does not submit a completed SBA Form 355, answers

to the protest allegations, or other requested information within the

allotted time provided by SBA, or if it submits incomplete information,

SBA may presume that disclosure of the form, any information missing

from it, or other missing information would show or tend to show that

the concern is other than a small business.

Sec. 121.1009 What are the procedures for making the size

determination?

(a) Time frame for making size determination. After receipt of a

protest or a request for a formal size determination, SBA will make a

formal size determination within 10 working days, if possible.

(b) Basis for determination. The size determination will be based

primarily on information supplied by the protestor or the entity

requesting the size determination and the subject concern. The

determination, however, may also be based on other grounds not raised

in the protest or request for size determination. SBA may utilize other

information in its files and may make inquiries including requests to

the protestor, the protested concern and any alleged affiliates, or

other persons for additional specific information.

(c) Burden of persuasion. The concern whose size is under

consideration has the burden of establishing its small business size.

[[Page 3302]]

(d) Weight of evidence. SBA will give greater weight to specific,

signed, factual evidence than to general, unsupported allegations or

opinions. In the case of refusal or failure to furnish requested

information within a required time period, SBA may assume that

disclosure would be contrary to the interests of the party failing to

make disclosure.

(e) Formal size determination. The SBA will base its formal size

determination upon the record, including reasonable inferences from the

record, and will state in writing the basis for its findings and

conclusions.

(f) Notification of determination. SBA will promptly notify the

contracting officer, the protestor, and the protested offeror, as well

as each affiliate or alleged affiliate, of the size determination. The

notification will be by certified mail, return receipt requested, or by

any overnight delivery service that provides proof of receipt.

(g) Results of an SBA size determination. (1) A formal size

determination becomes effective immediately and remains in full force

and effect unless and until reversed by OHA.

(2) Once SBA has determined that a concern is other than small for

purposes of a particular procurement, the concern cannot later become

eligible for the procurement by reducing its size.

(3) A concern determined to be other than small for a particular

size standard is ineligible for any procurement or assistance

authorized by the Small Business Act or the Small Business Investment

Act of 1958, requiring the same or a lower size standard, unless

recertified as small pursuant to Sec. 121.1010. Following an adverse

size determination, a concern cannot again self-certify as small within

the same or a lower size standard unless it is recertified as small by

SBA. If it does so, it may be in violation of criminal laws, including

section 16(d) of the Small Business Act, 15 U.S.C. 645(d). If the

concern has already certified itself as small on a pending procurement

or on another assistance application, the concern must immediately

inform the officials responsible for the pending procurement or other

requested assistance of the adverse size determination.

(h) Limited reopening of size determinations. In cases where the

size determination contains clear administrative error or a clear

mistake of fact, SBA may, in its sole discretion, reopen the size

determination to correct the error or mistake, provided the case has

not been accepted for review by OHA.

Sec. 121.1010 How does a concern become recertified as a small

business?

(a) A concern may request SBA to recertify it as small at any time

by filing an application for recertification with the Government

Contracting Area Office responsible for the area in which the

headquarters of the applicant is located, regardless of the location of

parent companies or affiliates. No particular form is prescribed for

the application; however, the request for recertification must be

accompanied by a current completed SBA Form 355 and any other

information sufficient to show a significant change in its ownership,

management, or other factors bearing on its status as a small concern.

(b) Recertification will not be required nor will the prohibition

against future self-certification apply if the adverse SBA size

determination is based solely on a finding of affiliation due to a

joint venture (e.g., ostensible subcontracting) limited to a particular

Government procurement or property sale, or is based on an ineligible

manufacturer where the eligible small business bidder or offeror is a

nonmanufacturer on a particular Government procurement.

(c) A denial of an application for recertification is a formal size

determination and may be reviewed by OHA at the discretion of that

office.

(d) The granting of an application for recertification has future

effect only. While it is a formal size determination, notice of

recertification is required to be given only to the applicant.

Appeals of Size Determinations and SIC Code Designations

Sec. 121.1101 Are formal size determinations subject to appeal?

There is no right of appeal of a size determination. OHA, however,

may, in its sole discretion, review a formal size determination made by

a SBA Government Contracting Area Office or by a Disaster Area Office.

Unless OHA accepts a petition for review of a formal size

determination, the size determination made by a SBA Government

Contracting Area Office or by a Disaster Area Office is the final

decision of SBA. The procedures for requesting discretionary reviews by

OHA of formal size determinations are set forth in part 134 of this

chapter.

Sec. 121.1102 Are SIC code designations subject to appeal?

Appeals may be made to OHA, which has exclusive jurisdiction to

determine appeals of SIC code designations pursuant to part 134 of this

chapter.

Sec. 121.1103 What are the procedures for appealing a SIC code

designation?

(a) Generally, any interested party who has been adversely affected

by a SIC code designation may appeal the designation to OHA. However,

with respect to a particular MED contract, only the Associate

Administrator for MED may appeal.

(b) Procedures for perfecting SIC code appeals with OHA are

contained in Sec. 19.303 of the Federal Acquisition Regulations, 48 CFR

19.303.

Subpart B--Other Applicable Provisions

Waivers of the Nonmanufacturer Rule for Classes of Products and

Individual Contracts

Sec. 121.1201 What is the Nonmanufacturer Rule?

The Nonmanufacturer Rule is set forth in Sec. 121.406(b).

Sec. 121.1202 When will a waiver of the Nonmanufacturer Rule be

granted for a class of products?

(a) A waiver for a class of products (class waiver) will be granted

when there are no small business manufacturers or processors available

to participate in the Federal market for that class of products.

(b) Federal market means acquisitions by the Federal Government

from offerors located in the United States, or such smaller area as SBA

designates if it concludes that the class of products is not supplied

on a national basis.

(1) When considering the appropriate market area for a product, SBA

presumes that the entire United States is the relevant Federal market,

unless it is clearly demonstrated that a class of products cannot be

procured on a national basis. This presumption may be particularly

difficult to overcome in the case of manufactured products, since such

items typically have a market area encompassing the entire United

States.

(2) When considering geographic segmentation of a Federal market,

SBA will not necessarily use market definitions dependent on airline

radius, political, or SBA regional boundaries. Market areas typically

follow established transportation routes rather than jurisdictional

borders. SBA examines the following factors, among others, in cases

where geographic segmentation for a class of products is urged:

(i) Whether perishability affects the area in which the product can

practically be sold;

(ii) Whether transportation costs are high as a proportion of the

total value

[[Page 3303]]

of the product so as to limit the economic distribution of the product;

(iii) Whether there are legal barriers to transportation of the

item;

(iv) Whether a fixed, well-delineated boundary exists for the

purported market area and whether this boundary has been stable over

time; and

(v) Whether a small business, not currently selling in the defined

market area, could potentially enter the market from another area and

supply the market at a reasonable price.

(c) Available to participate in the context of the Federal market

means that contractors exist that have been awarded or have performed a

contract to supply a specific class of products to the Federal

Government within 24 months from the date of the request for waiver,

either directly or through a dealer, or who have submitted an offer on

a solicitation for that class of products within that time frame.

(d) Class of products is an individual subdivision within a four-

digit Industry Number as established by the Office of Management and

Budget in the SIC Manual.

Sec. 121.1203 When will a waiver of the Nonmanufacturer Rule be

granted for an individual contract?

An individual waiver for a product in a specific solicitation will

be approved when the SBA Associate Administrator for Government

Contracting reviews and accepts a contracting officer's determination

that no small business manufacturer or processor can reasonably be

expected to offer a product meeting the specifications of a

solicitation, including the period of performance.

Sec. 121.1204 What are the procedures for requesting and granting

waivers?

(a) Waivers for classes of products. (1) SBA may, at its own

initiative, examine a class of products for possible waiver of the

Nonmanufacturer Rule.

(2) Any interested person, business, association, or Federal agency

may submit a request for a waiver for a particular class of products.

Requests should be addressed or hand-carried to the Associate

Administrator of Government Contracting, Small Business Administration,

409 3rd Street S.W., Washington, D.C. 20416.

(3) Requests for a waiver of a class of products need not be in any

particular form, but should include a statement of the class of

products to be waived, the applicable SIC code, and detailed

information on the efforts made to identify small business

manufacturers or processors for the class.

(4) If SBA decides that there are small business manufacturers or

processors in the Federal procurement market, it will deny the request

for waiver, issue notice of the denial, and provide the names,

addresses, and telephone numbers of the sources found. If SBA does not

initially confirm the existence of small business manufacturers or

processors in the Federal market, it will:

(i) Publish notices in the Commerce Business Daily and the Federal

Register seeking information on small business manufacturers or

processors, announcing a notice of intent to waive the Nonmanufacturer

Rule for that class of products and affording the public a 15-day

comment period; and

(ii) If no small business sources are identified, publish a notice

in the Federal Register stating that no small business sources were

found and that a waiver of the Nonmanufacturer Rule for that class of

products has been granted.

(5) An expedited procedure for issuing a class waiver may be used

for emergency situations, but only if the contracting officer provides

a determination to the Associate Administrator for Government

Contracting that the procurement is proceeding under the authority of

FAR Sec. 6.302-2 (48 CFR 6.302-2) for ``unusual and compelling

urgency,'' or provides a determination materially the same as one of

unusual and compelling urgency. Under the expedited procedure, if a

small business manufacturer or processor is not identified by a PASS

search, the SBA will grant the waiver for the class of products and

then publish a notice in the Federal Register. The notice will state

that a waiver has been granted, and solicit public comment for future

procurements.

(6) The decision by the Associate Administrator for Government

Contracting to grant or deny a waiver is the final decision by the

Agency.

(7) A waiver of the Nonmanufacturer Rule for classes of products

has no specific time limitation. SBA will, however, periodically review

existing class waivers to the Nonmanufacturer Rule to determine if

small business manufacturers or processors have become available to

participate in the Federal market for the waived classes of products

and the waiver should be terminated.

(i) Upon SBA's receipt of evidence that a small business

manufacturer or processor exists in the Federal market for a waived

class of products, the waiver will be terminated by the Associate

Administrator for Government Contracting. This evidence may be

discovered by SBA during a periodic review of existing waivers or may

be brought to SBA's attention by other sources.

(ii) SBA will announce its intent to terminate a waiver for a class

of products through the publication of a notice in the Federal

Register, asking for comments regarding the proposed termination.

(iii) Unless public comment reveals that no small business

manufacturer or processor in fact exists for the class of products in

question, SBA will publish a final Notice of Termination in the Federal

Register.

(b) Individual waivers for specific solicitations. (1) A

contracting officer's request for a waiver of the Nonmanufacturer Rule

for specific solicitations need not be in any particular form, but

must, at a minimum, include:

(i) A definitive statement of the specific item to be waived and

justification as to why the specifi

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