Small Business Size Standards; Engineering Services, Architectural Services, Surveying, and Mapping Services

SMALL BUSINESS ADMINISTRATION

13 CFR Part 121

Small Business Size Standards; Engineering Services,

Architectural Services, Surveying, and Mapping Services

AGENCY: Small Business Administration.

ACTION: Final rule.

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SUMMARY: The Small Business Administration (SBA) is establishing a size

standard of $4.0 million in average annual receipts for general

Engineering Services (part of Standard Industrial Classification (SIC)

code 8711), Architectural Services (SIC code 8712), Surveying (SIC code

8713) and Mapping Services (part of SIC code 7389). The current size

standard for the general Engineering component of SIC code 8711 and all

of SIC codes 8712 and 8713 is $2.5 million. For Mapping Services under

SIC code 7389, the current size standard is $3.5 million. These

revisions are made to more appropriately define the size of business in

these industries that SBA believes should be eligible for Federal small

business assistance programs.

DATES: This rule is effective on June 14, 1999.

FOR FURTHER INFORMATION CONTACT: Robert N. Ray, Office of Size

Standards, (202) 205-6618.

SUPPLEMENTARY INFORMATION: On February 3, 1998, SBA proposed a revision

to the size standard for general Engineering Services (part of SIC code

8711) from $2.5 million to $7.5 million (63 FR 5480). (The other size

standards applicable to Engineering Services under SIC code 8711--

Military and Aerospace Equipment, Military Weapons, Marine Engineering,

and Naval Architecture--were not reviewed as part of the proposed rule

and are not changed by this final rule.)

The proposed rule also revised the size standard for the

Architectural Services industry (SIC code 8712), from $2.5 million to

$5.0 million, and for the Surveying Services industry (SIC code 8713)

from $2.5 million to $3.5 million. SBA proposed no change to the $3.5

million size standard for Mapping Services categorized within Business

Services, Not Elsewhere Classified (SIC code 7389). SBA proposed that

Mapping Services should have the same size standard as Surveying

Services since they are closely related industries. Surveying Services

was proposed for adjustment to $3.5 million, the standard already

applicable to Mapping Services.

SBA proposed these size standards based on its analysis of the

latest

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available industry data from the U.S. Bureau of the Census (the Census

Bureau) and Federal contract award data from the Federal Procurement

Data Center. SBA evaluated certain factors describing the economic

characteristics of firms in the Engineering, Architectural, and

Surveying Services industries (industry data from the Census Bureau are

not available for Mapping Services under SIC code 7389). These factors

were average firm size, the distribution of industry revenues by size

of firm, start-up costs, and industry competition. SBA compared the

characteristics of the Engineering, Architectural, and Surveying

Services industries to the average characteristics of all industries

with a $5.0 million size standard (the most common size standard

established for nonmanufacturing industries and referred to as the

``anchor'' size standard for the nonmanufacturing industries).

Doing so enabled SBA to determine if the size standards for

Architectural, General Engineering, and Surveying Services should be

the same, higher, or lower than the $5 million anchor size standard. In

addition, SBA reviewed the percent of total Federal contract dollars

awarded to small businesses to determine if small businesses were

obtaining a reasonable share of Federal contracts. For a further

discussion of SBA's size standard methodology and the analyses leading

to the proposed size standards see the proposed rule of February 3,

1998 (63 FR 5480).

Reason for Adopting a $4.0 Million Size Standard for These

Industries

This final rule establishes a $4.0 million size standard for the

each of the general Engineering, Architectural, Surveying, and Mapping

Services industries. The decision to adopt this size standard rather

than those proposed primarily reflects our assessment of public

comments received on the proposed size standards. While industry and

Federal procurement data support the size standards originally

proposed, these data also indicate that $4.0 million is within a range

of size standards supportable by the data.

The size standards analysis is not a mechanical process that

produces a finite result. Rather, the analysis of industry and Federal

procurement data provides SBA with a reasonable range of size standards

to consider. Based on a review of specific industry characteristics and

other information, such as public comments on a proposed size standard,

SBA makes a decision on what final size standard to adopt within the

range of size standards supported by the data.

As discussed in greater detail below, a significant number of

comments disagree with the $7.5 million proposed size standard for

General Engineering Services and the $5.0 million proposed size

standard for Architectural Services. These comments express a

consistent and serious concern that smaller businesses, especially

those below the $2.5 million size standard, would not be competitive

with businesses whose sizes are at or near the size standards which

were proposed for general Engineering ($7.5 million) or Architectural

Services ($5.0 million).

SBA has accepted the significance of these concerns, and adopts the

lower size standard of $4.0 million to help address them, while at the

same time providing an appropriate recognition of the results of

inflation. Most comments separately addressing Surveying and Mapping

Services support a higher standard than the proposed $3.5 million. A

$4.0 million size standard helps address those views as well.

As explained below, numerous commenters strongly argue that a

common size standard should be established for the four industry

categories of general Engineering, Architecture, Surveying, and Mapping

Services to reflect the many related activities encompassing the

professional design industry. SBA agrees. The desirability of

establishing the same size standard for each of these industries,

provided industry-specific factors are reasonably consistent with that

standard, was a strong consideration in developing this final rule.

SBA's review of industry and Federal procurement data support $4.0

million as a reasonable size standard for these industries. As

discussed in the proposed rule, most of the industry factors for

Architectural Services and Surveying Services support a size standard

at or below SBA's anchor size standard of $5.0 million for

nonmanufacturing industries.

Also, as discussed in the proposed rule, the large discrepancy

between the share of Federal contract awards to small businesses in

these two industries and their share of total industry revenues support

an increase from the $2.5 million size standard. A size standard of

$4.0 million recognizes the impact of general inflationary trends that

have occurred since the current size standard was established in 1986,

as well as additional cost pressures related to the expanded use of

computerized applications experienced by engineering, architectural and

surveying and mapping firms. Thus, we believe a size standard at $4.0

million is a reasonable alternative to the proposed size standards for

Architectural Services and Surveying Services.

Although the industry data for general Engineering Services support

a size standard higher than the anchor size standard, the SBA is now

persuaded, in light of comments received, that Census Bureau data do

not adequately consider the integrated nature and relationships among

the four industry categories. For this reason, we believe the size

standard appropriate for Architectural Services and Surveying Services

is also appropriate for general Engineering Services.

Finally, we continue to believe the size standard for Surveying

Services should also be established for Mapping Services. As discussed

in the proposed rule, Surveying Services and Mapping Services are

considered closely related activities. The newly developed North

American Industry Classification System (NAICS) organizes firms engaged

in these two activities into a single industry. SBA will be

establishing size standards by NAICS industries in the near future, and

believes it should treat Surveying Services and Mapping Services as one

industry for size standards purposes.

Discussion of Comments

SBA received 177 timely comments on the proposed size standards.

Eight comments are from associations, two from officials of Government

agencies, and 167 from businesses and individuals. Several

organizations submitted multiple comments. By counting multiple

comments from the same organization as one, there are 130 comments from

individuals and organizations that express a clear preference for a

particular size standard. Just over half of the comments favor size

standards similar to or higher than those proposed, and just under half

favor no change to the current size standard or favor increases smaller

than those proposed.

The comments raise ten major issues concerning the proposed size

standards. Two of these issues strongly influenced our decision to

adopt a $4.0 million size standard for each of general Engineering,

Architectural, Surveying, and Mapping Services rather than the proposed

size standards ($7.5 million, $5.0 million, and $3.5 million,

respectively). These two issues involve the amount of increase

appropriate from the existing size standards, and whether there should

be a common size standard for all four industries. These two issues are

dealt with first in the following discussion of the major issues raised

by the commenters. Eight other issues raised by the commenters dealt

with

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other concerns. Below we explain our position on each.

Common Size Standard

A majority of the commenting associations, several individual

businesses, and one Government agency argue for a common size standard

for the general Engineering, Architectural, Surveying, and Mapping

Services industries. Many of these comments consider the Architecture,

Landscape Architecture, Engineering, Surveying, and Mapping Services as

fully integrated and comprising the ``Professional Design Services''

industry.

This multi-disciplined nature of the industry indicates the need

for a common size standard among these services. In the public sector,

these commenters argued that architects, landscape architects,

engineers, and surveyors often serve in similar positions of

responsibility, moving between jobs requiring a design professional's

expertise. In the private sector, many design professionals practice in

multidisciplinary design firms. These firms integrate the skills of

each profession to offer quality services to their clients.

Because of the integrated nature of multidisciplined firms, many of

the comments express concern that firms could be held to three

different size standards if the proposed size standards were adopted

depending on the nature of a particular project. This is seen as

confusing and unnecessary. Moreover, it is argued that with different

size standards, contracting officers will at times inappropriately

select the SIC code with the highest size standard when a procurement

calls for activities from different industries.

Based on these comments, we agree that a common size standard

should be established for general Engineering, Architectural,

Surveying, and Mapping Services. The industries of general Engineering

and Architectural Services are closely integrated and it is often

difficult to distinguish whether a Federal contract should be

classified under Architectural or Engineering Services. Also

competition on surveying contracts frequently involves firms from both

the Surveying Services and Engineering Services industries. In

addition, there could be a tendency for contracting officers to select

industries with higher size standards in cases where it's a ``close

call'' as to which industry best describes the primary purpose of the

contract. A common size standard will ensure that firms that compete in

closely related industries are subject to the same size standard, and

that contracting officers are not influenced by the size standard when

determining the proper SIC code for a Federal procurement.

We recognize that this position departs from the approach taken in

the proposed rule. Architectural, Engineering, and Surveying Services

are separate industries under the SIC system for which the Census

Bureau publishes data on firms primarily engaged in each industry.

(Mapping Services is a very small component of SIC 7389, which includes

a broad range of business services. No separate Census Bureau industry

data are available for Mapping Services.) The proposed rule was the

first time the SBA had both specific industry data to analyze a size

standard for Architectural, Engineering, and Surveying industries and

legal authority to make size standard changes.

When the $2.5 million size standard was adopted in 1986,

Engineering, Architectural, and Surveying Services made up only one SIC

industry. The revisions to the SIC System in 1987 created separate

industries for Engineering, Architectural, and Surveying Services from

that one industry. Census Bureau data for the 1987 SIC industries were

not available until 1990. By that time, the Congress had imposed a

prohibition against changing the size standards for these industries

(see the Small Business Competitiveness Demonstration Program Act,

Title VII, Public Law 100-656, 102 Stat. 3853, 3889). As explained in

the proposed rule, when SBA examined these industries they exhibited

significant differences. While these differences could support a

separate size standard for each industry, the comments received present

persuasive reasons why the SBA should continue to retain a common size

standard for those three industries even though the statutory

restriction has now been removed.

Furthermore, Census Bureau data corroborate the interaction that

exists among firms in these three industries. For example, a review of

the Census Bureau's publication ``Sources of Firm Revenues'' shows that

engineering firms earned revenues for surveying work equal to about

half the total revenues earned by surveying firms. Engineering firms

also earned revenues for architectural services equal to about nine

percent of the revenues earned by architectural firms. These data,

along with the comments, indicate that a common size standard for the

three industries is appropriate. As indicated above, SBA believes the

Mapping Services size standard should be the same as the Surveying size

standard. The end result is a common size standard for all four

industries.

The size standard for Landscape Architectural Services, also

considered part of the Professional Design Services industry, is $5.0

million, and was not part of the February 3, 1998, proposed rule. This

industry's size standard was revised from $3.5 million in 1994, as part

of SBA's inflation adjustment to receipts-based size standards. Since

the public was not given a fair opportunity to comment on any

adjustments to that size standard, we make no change to that size

standard in this final rule.

What the Appropriate Size Standard Should Be

Most of the comments addressed the question of what size standard

should be adopted for the general Engineering, Architectural,

Surveying, and Mapping Services industries. The comments supporting a

higher size standard generally argue that an increase is long overdue

since the $2.5 million size standard, established in 1986, was not

adjusted for inflation in 1994, when most other revenue-based size

standards were adjusted (see 59 FR 16513).

In addition, Federal contracts have in recent years grown

progressively larger and commenters argued that a higher size standard

is needed to recognize the size of small firms that can perform on

these newer contracts. The costs of entry into these industries have

also increased over time, especially technology costs. These technology

costs include computer-aided design and drafting, state-of-the-art

computer hardware, new engineering and architectural software, and

modern surveying equipment such as Global Positioning Software.

Several architectural firms also argued that the actual operations

of an architectural firm is significantly smaller than indicated by its

revenue size since the value of subcontracts, which may account for 30

percent to 40 percent of revenues, is included in calculating the gross

revenues of a firm. The supporters of a higher size standard also

stated that firms even exceeding the current $2.5 million are usually

not strong enough to compete successfully against mid-sized and large

firms. Thus, a size standard higher than $2.5 million is needed to help

small firms become more competitive.

Among comments opposing the proposed size standards, the most

common argument was that firms below $2.5 million in size could not

compete with firms in the $5.0 million to $7.5 million size range.

Firms below $2.5 million contend that they do not have the resources to

compete with these businesses in terms of preparing

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proposals for Federal contracts. These comments claim that contracting

officers will naturally favor the larger-sized firms that are within

the size standard. Larger firms have more personnel to draw on. Often

these larger firms can offer higher salaries, thus drawing in

professionals with strong reputations attractive to contracting

officers.

Since Federal contracts for general Engineering, Architectural,

Surveying, and Mapping Services are awarded using qualifications-based

selection criteria, larger and more experienced firms tend to have an

advantage over smaller and younger firms. Some comments also argue that

in some markets (e.g., New Mexico, Wyoming, and the District of

Columbia), all firms would be considered small under the proposed size

standards and, therefore, there would be no meaningful small business

definition.

While many of the comments made general statements on the proposed

new size standards, some commenters' comments specifically discussed

the proposed Surveying and Mapping Services size standard. A few wanted

no change to the current $2.5 million for reasons similar to those

given in opposition to the general Engineering and Architectural

Services size standards. A few others support the proposed $3.5 million

size standard, while most recommended size standards of between $4.0

million and $10.0 million. Those comments supporting an increase to the

current size standard cite high start-up costs for surveying and

mapping equipment and a concern that the Surveying and Mapping Services

size standard should be similar to the general Engineering Services

size standard. A mapping association, representing over 120 members,

recommends we establish a separate size standard for Mapping Services

of $7.5 million.

Although a majority of the comments favor the proposed size

standards or higher size standards than those proposed, almost an equal

number of comments recommend size standards lower than those proposed.

This large difference of opinion strongly suggests that the proposed

size standard increases were too high, particularly the proposed size

standard of $7.5 million for General Engineering Services. We agree

with many of the comments that firms below $2.5 million in size will

likely have difficulty competing with firms that are $5.0 million or

larger in size. A $4.0 million size standard addresses both the need

for a higher size standard than the current $2.5 million while ensuring

that smaller businesses in the industries are not significantly harmed

by a higher size standard. We also believe the adopted size standard

helps address the concern that all firms in a regional market could be

considered small under the proposed size standards.

Surveying and Mapping Services Size Standard

Several comments on the Surveying and Mapping Services size

standards argue that the cost of entry into photogrammetric mapping

activities is higher than the cost of entry into the Architectural

Services and Engineering Services industries and recommend a higher

size standard than proposed. Also, a mapping association argues that a

separate size standard should be established for Mapping Services given

the different characteristics of mapping firms as compared to surveying

firms.

Although the Census Bureau data used to evaluate the Surveying

Services industry clearly supports a size standard lower than that for

general Engineering Services, the data do not capture the significant

number of engineering firms that are engaged in Surveying Services.

Consequently, the size standard adopted for general Engineering and

Architectural Services is also adopted for Surveying and Mapping

Services. This does result in a higher size standard being adopted than

proposed.

With respect to establishing a separate size standard for Mapping

Services, SBA establishes size standards at the industry level, except

for a few special categories. The size standard established for an

industry reflects the characteristics of all firms engaged in all

activities within that industry. In every industry, some firms engage

in specialized activities that are too few in number to influence the

level of the size standard. To address the concerns of these comments,

we would have to establish a size standard for a sub-category under

Business Services, Not Elsewhere Classified. Only when a category

represents a major activity within an industry and is significantly

distinct from all other industry activities do we consider a size

standard below the industry level. If we were to routinely establish

size standards below the industry level, it could potentially

complicate size standards by creating hundreds if not thousands of

additional size standards. Information provided by a mapping

association does indicate that Mapping Services may be a sufficiently

large activity within the industry and Federal procurement for us to

examine whether a separate size standard should be established.

However, that decision will be made after additional study of the

industry and a change will be pursued as a separate proposed rule if it

is deemed necessary.

Historic and Cultural Preservation

A few commenters focused on a special subset of activities within

Engineering and Architectural Services involving historic or cultural

preservation. These submitters argue that raising the size standards as

proposed would devastate small businesses in this category, because, in

their view, most Federal contracts would be awarded to firms they

consider large businesses. These comments recommend either no change or

a much smaller increase to the current size standard.

These commenters expressed concerns similar to many of the

commenters arguing for no change in the size standards or lower

increases than proposed. As discussed above, SBA establishes size

standards at the industry level, except in a few instances where a

category represents a major activity within an industry that is

significantly distinct from all other activities. Based on the

information provided in the comments, we do not believe historic and

cultural preservation activities are a sufficiently large activity

within the Engineering and Architectural industries to warrant a

separate size standard. However, for reasons discussed above, a lower

size standard of $4.0 million is being adopted to apply to general

Engineering Services and to all Architectural Services that should

adequately address the concerns raised by these commenters.

Inflation Adjustment

A few comments recommend an inflationary adjustment to the size

standards on a regular basis.

The evaluation of economic characteristics of an industry is the

primary basis for establishing size standards. Historically, we review

size standards for inflation when a lengthy period of time has passed

since the last size standard revision or when a large number of

industries are under review. Because inflation affects industries

differently, it's not appropriate to specify in advance under what

situations an inflation adjustment will be made. Nonetheless, we do

monitor the rate of inflation on a continuing basis and will pursue an

inflation adjustment when it is considered necessary.

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Consideration of the North American Industry Classification System

Several comments recommend that we establish size standards based

on the North American Industry Classification System (NAICS) rather

than the Standard Industrial Classification (SIC) System.

We will convert size standards to the NAICS system in the near

future. At present, size standards are established following the SIC

system. Until the NAICS system is put in place, the SIC system will be

used by all Federal agencies for assigning an appropriate SIC code and

size standard to Federal procurements and for classifying the primary

industry of a firm. Moreover, the Engineering Services and

Architectural Services industries are the same under the NAICS and SIC

systems. For Surveying Services and Mapping Services, the NAICS combine

these two activities into either Geophysical Surveying and Mapping

Services or Surveying and Mapping (except Geophysical) Services

primarily from SIC code 8713. Thus, even if we establish size standards

based on the NAICS, the information currently available to evaluate

these industries would lead to the same size standard.

Industry Data

Several associations argue that the data used to evaluate the

industries is too old to be useful, and recommend that we withdraw the

proposed rule and publish a new proposal based on better data.

Although the data we used were derived from the 1992 Economic

Census, they represent the latest and best data available from the

Census Bureau on the distribution of firms by size. Moreover, the data

continue to be useful in assessing the structural characteristics of an

industry unless there have been significant changes in an industry

which fundamentally affect the operations of firms in the industry

(e.g., new production methods such as the use of electric furnaces to

make steel from ferrous scrap by mini-mills or the deregulation of an

industry).

Absent these types of major changes, the 1992 Census Bureau data

provide the SBA with reliable and objective data on the relative

position of small businesses within an industry and there is no

apparent reason to wait for newer data. (The Census Bureau gathers data

in an Economic Census every five years. Data for the 1997 Economic

Census was gathered in early 1998 and will not be available for about

two years.) Our review of Federal contract awards data, however, is

based on more recent data from Fiscal Years 1995 and 1996. More recent

contract data for Fiscal Year 1997 reveal small business awards in the

Engineering and Architectural Services industries similar to the

previous two fiscal years. Small business awards to surveying firms did

increase significantly in Fiscal Year 1997. However, the small business

share of Federal awards is significantly below the small business share

of total industry revenues, as was the case for Fiscal Years 1995 and

1996.

Size Standards Methodology

Several comments oppose our industry comparisons (using four

measures of industry characteristics), especially the use of payroll/

receipts ratios as a proxy for high initial capital requirements.

The evaluation of industry structure has been the primary basis for

establishing size standards by SBA for many years. The use of these

four measures to describe industry structure is well established within

SBA. In addition, we obtained new data for 1997 on average assets per

firm to improve the evaluation of startup costs. Because these data are

more useful and accurate than payroll/receipts data we reworked our

calculations. Our analysis using these data continues to support the

size standard conclusion contained in the February 3, 1998, proposed

rule and our decision in this final rule.

Small Business Contracting Opportunities

Several comments suggest that SBA should focus on other issues

harming small business opportunities in Federal procurement rather than

increasing size standards. These comments point out that contract

bundling, the use of design-build contracting, and indefinite delivery/

indefinite quantity task order contracts have adversely affected small

business participation. Also, many small businesses work as

subcontractors. The subcontracting program, however, is not monitored

rigorously by many agencies and the comments suggest that SBA should

gather better data on subcontracting efforts.

We are vigorously working on these other issues. Although these are

important issues affecting the opportunities of small businesses, they

generally do not affect the size standards analysis.

Calculation of Receipts

A few comments recommend that SBA count revenues in these

industries on a net basis in which costs for ``pass-through'' materials

and subcontracting would be excluded from the calculation of a firm's

size.

We believe the gross revenues of a firm is the most equitable way

to measure the size of a firm. In a few industries, the revenues earned

by a firm may not accurately reflect the magnitude of its operation, as

would be the case for a travel agency. We do calculate revenues

differently in those cases or use number of employees as the size

standard measure. Furthermore, the economic data from the Census Bureau

we use to evaluate size standards is based on gross revenues for most

industries. More specifically, the Census Bureau's data collected for

the Architectural Services and Engineering Services industries include

all revenues received by the company (including the value of

subcontracts). If we were to exclude the value of subcontracts and

other ``pass-through'' revenues, we would also have to establish a

lower size standard to properly reflect the size of small businesses in

the industry.

Dominant Field of Operation

In the proposed rule, SBA stated that no firm at or below the

proposed size standards business would be dominant in its field of

operations. Only a few comments addressed this issue. Of those

comments, most indicated that only firms of 500 to 5,000 employees

could have a controlling influence on the Engineering, Architectural

Surveying, or Mapping Services industries--a size well above the

proposed size standards. A few commenters did express a concern that in

a local area all Architectural firms could qualify as small business

under the proposed size standards. In considering whether a firm is

dominant in an industry, SBA assesses whether a firm may have a

controlling influence on an industry on a national basis. In

consideration of the comments, and the analysis in the proposed rule,

SBA believes no firms at or below the adopted size standard would be

dominant in the Engineering, Architectural, Surveying or Mapping

Services industries.

Compliance With Executive Orders 12612, 12988, and 12866, the

Regulatory Flexibility Act (5 U.S.C. Sec. 601-612), and the

Paperwork Reduction Act (44 U.S.C. Sec. 3501 et seq.)

The Office of Management and Budget (OMB) reviewed this rule under

Executive Order 12866. OMB determined that this is not a major rule

under the Congressional Review Act, 5 U.S.C. 800, et. seq. This rule,

however, will have a significant impact on a substantial number of

small entities. Immediately below, SBA sets forth a

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final regulatory impact analysis of this final rule.

1. Description of Entities to Which the Rule Applies

SBA estimates that 1,460 additional firms will be considered small

as a result of this rule. These firms will be eligible to seek

available SBA assistance provided they meet other program requirements.

Many of these firms probably had small business status in 1986 when

these size standards were established at $2.5 million, but have since

lost eligibility because of general price increases. Of the 1,460

additional firms gaining eligibility, 1,015 operate in Engineering

Services, 340 operate in Architectural Services, 60 operate in

Surveying Services, and 45 operate in Mapping Services. Firms becoming

eligible for SBA assistance as a result of this rule cumulatively

generate $2.3 billion in annual sales, and total sales in these

industries are $77.5 billion. Of the $2.3 billion for newly eligible

firms, $1.7 billion are in Engineering Services, $0.6 billion are in

Architectural Services, $56.0 million are in Surveying Services, and

$45.0 million in Mapping Services.

2. Potential Benefits of the Rule

We have identified two areas of benefit to businesses obtaining

small business status as a result of adoption of this rule. One is

eligibility for the Federal Government's small business procurement

preference programs and SBA's Business Loan Program. SBA estimates that

firms gaining small business status could potentially obtain Federal

contracts worth $45.0 million per year under the Small Business Set-

aside Program, the 8(a) Program, or unrestricted contracts. Second, we

estimate $2.5 million in new loans could be made to these newly defined

small businesses under SBA's 7(a) Guaranteed Loan Program, and an

additional $0.7 million in loans under the Certified Development

Company (504) Program. These small increases occur since most firms

that obtain SBA guaranteed loans tend to have less than $2.0 million in

revenues. Another benefit identified is that increased competition for

many of these procurements would likely result in a lower price to the

government for procurements which have been set aside, but we are

unable to quantify this benefit.

3. Potential Costs of the Rule

The changes in size standards as they affect Federal procurement

are not expected to add any significant costs to the Government. As a

matter of policy, Federal procurements may be set aside for small

business or under the 8(a) Program only if awards are expected to be

made at reasonable prices. Changing a size standard would not result in

any added costs associated with the 7(a) and 504 loan programs. The

amount of lending authority SBA can make or guarantee is established by

appropriation. The competitive effects of size standard revisions

differ from those normally associated with changes in regulations. The

new size standards will not impose a regulatory burden because they do

not regulate or control business behavior.

Other regulations in areas such as prices, costs, profits, growth,

innovation and mergers typically burden smaller firms to a greater

degree than larger firms. The change to a size standard is not

anticipated to have any appreciable affect on any of these factors,

although small businesses or 8(a) firms much smaller than the size

standard for their industries may be less successful in competing for

some Federal procurement opportunities due to the presence of larger,

newly defined small businesses. On the other hand, with more and larger

small businesses competing for small business set-aside and 8(a)

procurements, contracting agencies are likely to increase the overall

number of contacting opportunities available under these programs.

4. Potential Net Benefits From the Rule

Two benefits were identified for small businesses and one for

Government. Because the potential costs of this rule are minimal, the

potential net benefits will be approximately equal to the total

potential benefits. Most of the impact of this rule will appear in the

Federal procurement area.

5. Reasons Why This Action Is Being Taken and Objectives of Rule

SBA has provided in the supplementary information a statement of

the reasons why these new size standards should be established and a

statement of the reasons for and objectives of this rule.

For the purpose of the Paperwork Reduction Act, 44 U.S.C. 3501, et

seq., SBA certifies that this rule will not impose new reporting or

record keeping requirements, other than those required of SBA. For

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

not have any federalism implications warranting the preparation of a

Federalism Assessment. For purposes of Executive Order 12988, SBA

certifies that this rule is drafted, to the extent practicable, in

accordance with the standards set forth in section 3 of the Order.

List of Subjects in 13 CFR part 121

Government procurement, Government property, Grant programs--

business. Loan programs--business. Small business.

For the reasons stated in the preamble, SBA amends 13 CFR part 121

as follows:

Part 121--SMALL BUSINESS SIZE REGULATIONS

1. The authority citation for part 121 is revised to read as

follows:

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

662(5);

2. In Sec. 121.201 in the table ``Size Standards by SIC Industry,''

under the heading DIVISION I--SERVICES, revise the entries

corresponding to 7389, 8711, 8712, and 8713 to read as follows:

Sec. 121.201 What size standards has SBA identified by Standard

Industrial Classification codes?

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[[Page 26281]]

Size Standards by SIC Industry

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Size standards in number of employees or millions

SIC code and description of dollars

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* * * * * *

*

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DIVISION I--SERVICES

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* * * * * *

*

7389 Business Services, N.E.C......................... $5.0

Except, Map Drafting Services, Mapmaking $4.0

(Including Aerial) and Photogrammetric Mapping

Services.

* * * * * *

*

8711 Engineering Services............................. $4.0

Military and Aerospace Equipment and Military $20.0

Weapons.

Contracts and Subcontracts for Engineering $20.0

Services Awarded Under the National Energy Policy

Act of 1992.

Marine Engineering and Naval Architecture.... $13.5

8712 Architectural Services (Other than Naval)........ $4.0

8713 Surveying Services............................... $4.0

* * * * * *

*

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Aida Alvarez,

Administrator.

[FR Doc. 99-12267 Filed 5-13-99; 8:45 am]

BILLING CODE 8025-01-P