[Federal Register Volume 64, Number 199 (Friday, October 15, 1999)]
[Proposed Rules]
[Pages 55873-55878]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-26783]
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SMALL BUSINESS ADMINISTRATION
13 CFR Part 121
Small Business Size Standards; Help Supply Services
AGENCY: Small Business Administration.
ACTION: Proposed rule.
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SUMMARY: The Small Business Administration (SBA) proposes a size
standard of $10 million in average annual receipts for Help Supply
Services--Standard Industrial Classification (SIC) 7363. The current
size standard for this industry is $5 million. SBA proposes this
revision to better define the size of business in this industry that
SBA believes should be eligible for Federal small business assistance
programs. SBA also proposes clarifying language in the small business
size regulations about affiliation when a Professional Employer
Organization (PEO) is co-employer of a firm's employees.
DATES: Submit comments on or before December 14, 1999.
ADDRESSES: Send comments to Gary M. Jackson, Assistant Administrator
for Size Standards, 409 3rd Street, S.W., Mail Code 6880, Washington
D.C. 20416. SBA will make all public comments available to any person
or entity upon request.
FOR FURTHER INFORMATION CONTACT: Patricia B. Holden, Office of Size
Standards, (202) 205-6618 or (202) 205-6385.
SUPPLEMENTARY INFORMATION: SBA received requests from the public to
review the size standard for the Help Supply Services industry (SIC
7363). These requests express concern that the size standard has not
kept pace with the rapid growth in the industry due in part to the
trends of outsourcing and downsizing. The industry has changed in two
ways; help supply firms are larger and they are providing a wider range
of personnel to businesses. One request also urged SBA to allow help
supply firms to exclude funds collected for and remitted to
unaffiliated third parties from gross receipts, as is currently done
for travel agents, real estate agents, and others, since 60 percent to
85 percent of revenues on many Federal contracts are ``passed through''
to a firm's employees or associates.
The current size standard for this industry, $5 million, is based
on gross billings including funds paid to employees (sometimes referred
to as ``associates''). Based on a review of industry data, SBA proposes
increasing the size standard for the Help Supply Services industry to
$10 million in average annual receipts. SBA does not propose a change
to the way average annual receipts are calculated for firms in the Help
Supply Services Industry (SIC code 7363). Under SBA's size regulations
(13 CFR 121.104), the size of a firm for a receipts-based size standard
is based on information reported on a firm's Federal tax returns.
Generally, receipts reported to the Internal Revenue Service (IRS)
include a firm's gross receipts or sales from provision of goods or
services. As explained below, SBA evaluated this issue and disagrees
that these types of receipts should be excluded from the calculation of
size for firms in this industry. Accordingly, the following discussion
explains the reasons for the proposed revision.
[[Page 55874]]
Calculation of Average Annual Receipts
Although SBA reviews requests to exclude receipts of certain
business activities on a case-by-case basis, the structure of the
reviews is consistent with past proposed rules on this issue (see,
e.g., advertising agencies, 57 FR 38452, and conference management
planners, 60 FR 57982). The reviews identify and evaluate five industry
characteristics under which it might be appropriate to exclude certain
funds received and later transmitted to an unaffiliated third party:
1. Does a broker or agent-like relationship exist between a firm
and a third party provider and is that relationship a dominant or
crucial activity of firms in the industry?
2. Are the pass-through funds associated with the broker or agent-
like relationship a significant portion of the firm's total receipts?
3. Consistent with the normal business practice of firms in the
industry, after the pass-through funds are remitted to a third party,
is the firm's remaining income typically derived from a standard
commission or fee?
4. Do firms in this industry usually consider billings that are
reimbursed to other firms as their own income, or do they prefer to
count only receipts that are retained for their own use?
5. Do Federal Government agencies, which engage in the collection
of statistics, and other industry analysts typically report receipts of
the industry firms on an adjusted receipts basis?
SBA's review of information obtained on the Help Supply Services
industry finds that these characteristics do not exist in the industry.
Therefore, an assessment of these characteristics does not support the
proposal to exclude funds received in trust for unaffiliated third
parties from the calculation of a Help Supply Services firm's receipts-
size. The following discussion summarizes these findings.
1. No Agent-Like Relationship
The Standard Industrial Classification Manual (1987) states that
this industry encompasses ``establishments primarily engaged in
supplying temporary or continuing help on a contract or fee basis. The
help supplied is always on the payroll of the supplying establishments,
but is under the direct or general supervision of the business to whom
the help is furnished.'' (See SIC 7363, page 364.) Types of
establishments include employee leasing service, fashion show model
supply services, help supply services, modeling services, and temporary
help services. These firms do not act as agents, but as employers. Some
firms even provide health and 401K plans. Their employees are not
unaffiliated third parties. Therefore, the dominant activity in this
industry is not carried out in a broker or agent-like relationship.
2. Pass-Through Funds Are Not a Significant Portion of Total Receipts
It is common practice in the industry for the Help Supply Services
firm to include sufficient funds in a contract to pay the salaries of
the workers provided. These funds are then, indeed, passed through to
the workers just as any firm providing any other product charges enough
to cover the cost of labor. But these funds are not held ``in trust;''
instead, they are the firm's own funds. How the supplying firm acquires
and pays for labor is a business decision. Size standards should not be
constructed to favor one labor arrangement over another. This issue
often arises when part of a contract is subcontracted. The contractor
has the option of employing enough workers to do the task and chooses
not to do so. Funds which are temporarily held in trust by a firm for
remittance to a airline, government agency, or home seller are
different in several respects, including the fact that the firm does
not have the option/business decision of whether or not the home
seller, airline, or government agency will be an employee or a
subcontractor. It is true (and not unusual) that the funds which are
reported to be ``passed through'' to the associates constitute the
majority of the contract revenue. Labor costs in most industries are
the largest cost. The size of the labor costs relative to the total
billing is not a reason to exclude them from calculation of gross
revenues.
3. Remaining Income Is Not Derived From Standard Commission or Fee
Real estate agents, travel agents, advertising agencies, and
conference planners derive their gross income from commissions and
fees, whereas most firms derive their gross income from pricing their
products. Both types of industries must then pay labor costs. SBA is
not aware of any commissions or fees that are standard in the Help
Supply Services industry. Contracts with and bills to the help supply
firms usually reflect charges for labor and overhead. Overhead, like
wages, varies for many reasons, including the types of benefits firms
provide their employees and efficiency of operation. Without such an
industry standard or practice, it would be impossible to implement a
size standard based on a firm's adjusted gross revenue from fees or
commissions. By contrast, in the travel industry, if the bookings are
$1 million, then it can be inferred that the adjusted gross income to
the firm is $100,000 because the industry commission and fee structure
is standard and well-known.
4. Firms in This Industry Usually Consider Billings as Gross Income
Firms in the Help Supply Services industry consider funds collected
as their own funds even though they face substantial labor costs. The
help supply firm is the one who hires and fires the employee,
negotiating their wages and benefits in the process. Their labor costs
are reflected in their bids to supply labor. The funds the help supply
firm receives to cover labor costs are fundamentally different from
funds received by a real estate agent which must be put into an escrow
account, and are never considered the real estate firm's funds. In
fact, the real estate firm would face substantial penalties if the
funds are co-mingled with its own funds. Not only is the payment
structure different, the relationship is different in the two
industries. In principal-agent relationships, the agent must, by law,
act in a fiduciary capacity for the principal. SBA is not aware of any
practice or requirement that help supply firms must act as fiduciary
for the firm to which it supplies labor.
5. Federal Agencies and Industry Analysts Typically Do Not Represent
Receipts of These Firms on an Adjusted Receipts Basis
Finally, data from the U.S. Bureau of the Census (Census Bureau) on
this industry, upon which that SBA evaluates size standards, shows firm
receipts based on gross revenue, not commission or fee. The survey form
used by the Census Bureau (SV 7306) when surveying Help Supply Services
firms does not specifically instruct them to report only agency or
brokerage commissions or fees as it does on Form UT 4700, page 2, items
1 & 2 (used to survey firms that arrange transportation of freight and
cargo and ``Freight Forwarding (net)'').
Thus, the Census Bureau recognizes that the normal arrangement in
this industry is to treat all revenue as gross income irrespective of
labor costs. Similarly, the credit reporting firm of Dun and Bradstreet
also reports receipts for firms in this industry by gross billings less
any discounts or refunds.
None of the five factors support treating the Help Supply Services
industry like the industries that operate as agents, such as a travel
or real estate agency. In fact, evaluation of the factors
[[Page 55875]]
strongly supports using gross revenue as the basis for the size
standard. Based on the findings discussed above, SBA believes it is
appropriate to continue to include all amounts collected on Help Supply
Services contracts when calculating receipts.
Size Standard for the Help Supply Services
Based on requests received from the public, SBA believes it is
appropriate to re-evaluate the size standard to see what, if any,
changes in the industry have occurred since the size standard of $5
million was established. Based on that evaluation, SBA proposes a $10
million size standard for this industry. The following discussion
describes SBA's size standards methodology and the evaluation of data
on the Help Supply Services industry supporting a revision to the
current size standard.
Size Standards Methodology
Congress granted SBA discretion to establish detailed size
standards. SBA generally considers four categories for establishing and
evaluating size standards:
1. The structure of the industry and its various economic
characteristics;
2. SBA program objectives and the impact of different size
standards on these programs;
3. Whether a size standard successfully excludes those businesses
which are dominant in the industry; and
4. Other factors if applicable.
Other factors may come to SBA's attention during the public comment
period or from SBA's own research on the industry. The reason SBA has
not adopted a general formula or uniform weighting system is to ensure
that the factors will be evaluated in context of a specific industry.
Below is a discussion of SBA's analysis of the economic characteristics
of an industry, the impact of a size standard on SBA programs, and the
evaluation of whether a firm at or below a size standard could be
considered dominant in the industry.
Industry Analysis
Paragraphs (a) and (b) of 13 CFR 121.102 list evaluation factors
which are the primary factors describing the structural characteristics
of an industry--average firm size, distribution of firms by size,
start-up costs and entry barriers, and degree of industry competition.
While these evaluation factors are generally considered the most
important indicators of industry structure, SBA will consider and
evaluate all relevant information that is helpful in assessing an
industry's size standard. Below is a brief description of the industry
structure evaluation characteristics.
1. Average firm size is simply total industry revenues (or number
of employees) divided by the total number of firms. If an industry has
an average firm size significantly higher than the average firm size of
a group of comparative industries (in this case, industries with the
anchor size standard of $5 million in receipts), this fact may support
establishing a higher size standard than the one in effect for the
group of related industries. Conversely, data showing an industry with
a significantly lower average firm size relative to the related group
of industries tends to support a lower size standard.
2. The distribution of firms by size examines the proportion of
industry sales, employment, or other economic activity accounted for by
firms of different sizes within an industry. If the majority of an
industry's output comes from large firms, this would tend to support a
higher size standard than the anchor. The opposite is true for an
industry in which the distribution of firms by size indicates that
output is concentrated among the smaller firms in an industry.
3. Start-up costs affect a firm's initial size because entrants
into an industry must have sufficient capital to start a viable
business. To the extent that firms in an industry have greater start-up
capital requirements than firms in other industries, SBA is justified
in considering a higher size standard. As a proxy measure for start-up
costs, SBA examines the average level of assets for firms in an
industry. An industry with a relatively high level of average assets
per firm as compared with the average assets per firm of the group of
comparative industries with a $5 million size standard is likely to be
a capital intensive industry in which start-up costs tend to be higher
for firms entering the industry. For those types of industries, that
circumstance may support the need for a relatively higher size standard
than the anchor size standard.
4. SBA assesses the degree of industry competition by measuring the
proportion or share of industry sales obtained by firms above a
relatively large firm size. In this proposed rule, SBA analyzes the
proportion of industry sales generated by the four largest firms in an
industry--generally referred to as the ``four-firm concentration
ratio.'' If a significant proportion of revenue from sales within an
industry is concentrated among a few relatively large producers, SBA
tends to set a higher size standard to assist a broader range of firms
to compete with firms that are clearly dominant in the industry. If
this factor shows the industry to be highly competitive, SBA tends to
apply the anchor.
5. Competition for Federal procurements and SBA financial
assistance. SBA also evaluates the impact of a size standard on its
programs and other applications of size standards to determine whether
small businesses defined under the existing size standard are receiving
a reasonable level of assistance. This assessment mainly focuses on the
proportion or share of Federal contract dollars awarded to small
businesses. In general, the lower the share of Federal contract dollars
awarded to small businesses in an industry which receives significant
Federal procurement revenues, the greater the justification for a size
standard higher than the existing one.
Another factor SBA considers when evaluating the impact of a
proposed size standard on SBA programs is the volume of guaranteed
loans within an industry and the size of firms in that industry
obtaining loans in SBA's financial assistance programs. SBA considers
this factor when determining whether or not the current size standard
may inappropriately restrict the level of financial assistance to firms
in that industry. If small businesses receive ample assistance through
these programs, a change to the size standard (especially if it is
already above the anchor size) may not be appropriate.
SBA established a size standard of 500 employees for the
manufacturing and mining industries at SBA's inception in 1953. Shortly
thereafter, SBA established a $1 million size standard for the
nonmanufacturing industries. These two size standards are generally
referred to as ``a base or anchor size standards.'' The revenue-based
size standards were adjusted for inflation so that, currently, the
anchor size for the nonmanufacturing industries is $5 million.
If the structural characteristics of an industry are significantly
different from the average characteristics of industries with the
anchor size standard, a size standard higher or, in rare cases, lower
than the anchor size standard may be supportable. Only when all or most
of the industry data are significantly smaller than the average
characteristics of the anchor group industries, or other industry
considerations suggest the anchor standard is an unreasonably high size
standard, will SBA adopt a size standard below the anchor size
standard.
Excluding agriculture and subsistence categories, which generally
have size
[[Page 55876]]
standards established by statute, only seven industries in the revenue-
based size standards are below the $5 million anchor. None in the
manufacturing or mining industries is below the 500 employee-based size
standards.
For the Help Supply Services industry under review in this proposed
rule, SBA begins by comparing the characteristics of the five
evaluation factors for this industry to the average characteristics of
the nonmanufacturing industries which have the anchor size standard of
$5 million (hereafter referred to as the nonmanufacturing anchor
group). If the characteristics of the industry are similar to the
average characteristics of the nonmanufacturing anchor group, then the
anchor size standard of $5 million is considered an appropriate size
standard for that industry. If, however, the industry characteristics
significantly differ from the average characteristics of the
nonmanufacturing anchor group, then a size standard above or below $5
million may be appropriate.
Evaluation of Industry Size Standard
SBA analyzed the size standard for the Help Supply Services
industry by comparing the industry's characteristics with the average
characteristics of the nonmanufacturing anchor group discussed above.
SBA examined economic data on the industry using:
A special tabulation of the 1992 Economic Census prepared
on contract by the U.S. Bureau of the Census;
Asset data from Dun and Bradstreet's 1998 Industry Norms
and Key Business Ratios;
Federal contract award data for fiscal years 1997 and 1998
from the U.S. General Services Administration's Federal Procurement
Data Center; and
7(a) Business Loans from SBA's database.
The table below shows the characteristics for the Help Supply
Services industry compared to the average characteristics for the
nonmanufacturing anchor group. A review of these factors leads to a
proposed size standard of $10 million for this industry.
Industry Characteristics of SIC 7363 Compared to the Nonmanufacturing Anchor Group
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Percent of industry sales by firms Percent of
of Average gov't
Average ------------------------------------ assets per Four-firm procurement
Category firm size firm ($ concentration dollars to
($ mil.) <$5mil.><$10mil.><$25mil. mil.)="" ratio="" small="" business="" --------------------------------------------------------------------------------------------------------------------------------------------------------="" nonmanufacturing="" anchor="" group.................................="" $0.85="" 51.0="" 61.0="" 67.0="" $0.5="" 15.0="" 21.0="" help="" supply="" services="" industry.................................="" 2.98="" 26.3="" 37.2="" 52.0="" 0.56="" 11.1="" 10.7="" --------------------------------------------------------------------------------------------------------------------------------------------------------="" the="" average="" firm="" size="" in="" the="" help="" supply="" services="" industry="" is="" more="" than="" three="" times="" larger="" than="" the="" average="" firm="" size="" of="" the="" nonmanufacturing="" anchor="" group.="" this="" shows="" that="" firms="" in="" the="" help="" supply="" services="" industry="" tend="" to="" be="" much="" larger="" in="" size="" than="" firms="" in="" other="" non-manufacturing="" anchor="" group="" and="" supports="" a="" size="" standard="" at="" least="" $10="" million.="" the="" distribution="" of="" sales="" by="" firm="" size="" also="" supports="" a="" size="" standard="" for="" this="" industry="" at="" least="" $10="" million.="" under="" this="" factor,="" the="" proportion="" of="" industry="" sales="" obtained="" by="" firms="" of="" $5="" million="" and="" less="" in="" sales,="" $10="" million="" and="" less="" in="" sales,="" and="" $25="" million="" and="" less="" in="" sales="" is="" much="" smaller="" than="" that="" of="" firms="" of="" the="" same="" size="" class="" found="" for="" the="" anchor="" nonmanufacturing="" group.="" the="" average="" assets="" per="" firm="" show="" that="" the="" industry="" is="" capital="" intensive,="" similar="" to="" the="" industries="" in="" the="" anchor="" group,="" and="" thus,="" would="" support="" a="" size="" standard="" at="" the="" anchor="" of="" $5="" million.="" however,="" the="" average="" assets="" per="" firm="" is="" not="" substantially="" different="" from="" the="" anchor="" group="" and="" so="" would="" not="" by="" itself="" support="" a="" standard="" higher="" than="" the="" present="" $5="" million="" standard.="" the="" four-firm="" concentration="" ratio="" likewise="" is="" similar="" to,="" but="" slightly="" less="" than,="" the="" anchor="" group="" characteristic="" size="" standard--no="" higher="" than="" $5="" million.="" the="" four-firm="" concentration="" ratio="" shows="" that="" the="" four="" largest="" firms="" in="" the="" help="" supply="" services="" industry="" account="" for="" only="" 11="" percent="" of="" the="" industry="" revenues,="" while="" the="" four="" largest-firms="" in="" the="" nonmanufacturing="" anchor="" group="" account="" for="" 15="" percent.="" this="" factor="" shows="" the="" industry="" is="" already="" highly="" competitive.="" if="" a="" few="" large="" firms="" were="" controlling="" a="" large="" portion="" of="" the="" industry="" revenues,="" then="" raising="" the="" size="" standard="" above="" the="" anchor="" size="" standard="" might="" help="" smaller="" firms="" compete.="" however,="" when="" the="" industry="" is="" already="" competitive,="" as="" this="" one="" is,="" nothing="" would="" be="" gained="" in="" competitiveness="" by="" lowering="" the="" size="" standard.="" therefore,="" we="" conclude="" that="" the="" four-firm="" concentration="" ratio="" does="" not="" support="" a="" standard="" either="" higher="" or="" lower="" than="" the="" anchor.="" purpose="" of="" and="" impact="" on="" sba="" programs="" the="" percent="" of="" federal="" contract="" dollars="" awarded="" to="" small="" firms="" in="" the="" help="" supply="" services="" industry="" during="" fiscal="" years="" 1997="" and="" 1998="" is="" about="" half="" as="" large="" as="" the="" share="" of="" federal="" contracting="" going="" to="" small="" firms="" within="" the="" non-manufacturing="" anchor="" group.="" this="" supports="" an="" increase="" to="" the="" current="" size="" standard.="" in="" fiscal="" years="" 1997="" and="" 1998,="" of="" the="" 1,049="" actions="" reported="" by="" the="" federal="" procurement="" data="" system,="" 645="" (61="" percent)="" went="" to="" small="" firms.="" while="" the="" 645="" actions="" were="" 61="" percent="" of="" the="" total="" actions,="" they="" were="" only="" 10.7="" percent="" of="" the="" total="" contract="" dollars="" awarded="" when="" the="" two="" years="" are="" combined.="" this="" industry="" is="" lagging="" behind="" those="" in="" the="" anchor="" group.="" also,="" an="" increase="" to="" the="" size="" standard="" for="" this="" industry="" appears="" reasonable="" based="" on="" the="" distribution="" of="" sba="" guaranteed="" loans="" under="" the="" 7(a)="" program.="" in="" fiscal="" years="" 1994="" through="" 1998,="" small="" businesses="" in="" the="" help="" supply="" services="" industry="" received="" a="" total="" of="" 229="" loans="" which="" averaged="" $116,800.="" the="" number="" of="" 7(a)="" loans="" to="" this="" industry="" has="" taken="" a="" downward="" trend="" in="" recent="" years,="" from="" 81="" in="" fy="" 1995="" to="" 25="" in="" fy="" 1998.="" the="" total="" dollar="" value="" has="" also="" declined="" during="" that="" time,="" from="" $6,951,029="" to="" $2,651,687.="" as="" in="" federal="" procurement,="" the="" potential="" exists="" to="" increase="" 7(a)="" loans="" going="" to="" this="" industry.="" both="" the="" level="" of="" participation="" in="" this="" program="" and="" the="" trend="" would="" support="" a="" $10="" million="" size="" standard="" as="" one="" providing="" a="" reasonable="" level="" of="" assistance="" to="" small="" businesses="" in="" this="" industry.="" considering="" these="" industry="" structure="" factors="" and="" the="" impact="" on="" sba="" programs="" in="" the="" aggregate,="" sba="" believes="" that="" the="" $10="" million="" size="" standard="" is="" reasonable="" and="" would="" provide="" assistance="" to="" firms="" we="" believe="" should="" be="" eligible="" as="" small="" business="" for="" this="" industry.="" three="" of="" the="" industry="" factors="" support="" a="" size="" standard="" higher="" than="" the="" non-="" manufacturing="" anchor="" group="" and="" two="" industry="" factors="" [[page="" 55877]]="" support="" a="" size="" standard="" at="" the="" anchor="" size="" standard.="" dominant="" in="" field="" of="" operation="" section="" 3(a)="" of="" the="" small="" business="" act="" defines="" a="" small="" concern="" as="" one="" that="" is="" independently="" owned="" and="" operated,="" not="" dominant="" in="" its="" field="" of="" operation,="" and="" within="" detailed="" definitions="" or="" standards="" established="" by="" the="" sba="" administrator.="" as="" part="" of="" its="" evaluation="" of="" a="" size="" standard,="" sba="" considers="" whether="" a="" business="" concern="" at="" or="" below="" a="" recommended="" size="" standard="" would="" be="" considered="" dominant="" in="" its="" field="" of="" operation.="" this="" assessment="" generally="" considers="" the="" market="" share="" of="" firms="" at="" a="" proposed="" size="" standard="" as="" well="" as="" other="" factors="" that="" may="" reveal="" if="" a="" firm="" can="" exercise="" a="" major="" controlling="" influence="" on="" a="" national="" basis="" in="" which="" significant="" numbers="" of="" business="" concerns="" are="" engaged.="" sba="" has="" determined="" that="" at="" the="" recommended="" size="" standard="" of="" $10="" million,="" no="" firm="" at="" or="" below="" those="" levels="" would="" be="" of="" a="" sufficient="" size="" to="" be="" dominant="" in="" its="" field="" of="" operation.="" firms="" at="" the="" proposed="" size="" standard="" generate="" less="" than="" .02="" percent="" of="" total="" industry="" sales.="" this="" level="" of="" market="" share="" effectively="" precludes="" any="" firm="" from="" exerting="" a="" controlling="" effect="" on="" the="" industry.="" sba="" also="" proposes="" to="" add="" clarifying="" language="" to="" sec.="" 121.103(b)(4).="" paragraph="" (b)="" discusses="" exclusions="" from="" affiliation="" rules="" while="" paragraph="" (b)(4)="" specifically="" excludes="" business="" concerns="" that="" lease="" employees.="" we="" propose="" to="" insert="" professional="" employee="" organizations="" (peos)="" in="" this="" section="" along="" with="" leasing="" companies.="" their="" relationship="" with="" the="" firms="" to="" whom="" they="" provide="" employees="" and="" staffing="" services="" are="" similar,="" yet="" questions="" arise="" from="" time-to-time="" because="" peos="" were="" not="" specifically="" mentioned="" in="" the="" exclusion.="" sba="" will="" not="" find="" a="" firm="" affiliated="" with="" a="" leasing="" company="" or="" peo="" merely="" because="" it="" uses="" the="" services="" of="" a="" leasing="" company="" or="" peo.="" however,="" sba="" might="" find="" affiliation="" based="" on="" other="" conditions.="" nothing="" in="" the="" clarification="" of="" the="" exclusions="" to="" the="" affiliation="" rule="" is="" intended="" to="" change="" the="" way="" a="" firm="" must="" count="" its="" employees="" when="" determining="" size.="" all="" employees="" must="" be="" counted;="" whether="" permanent,="" part-time,="" temporary,="" leased="" or="" covered="" by="" a="" contract="" with="" a="" peo.="" how="" a="" firm="" obtains="" its="" staffing="" is="" a="" business="" decision,="" and="" size="" standards="" are="" not="" intended="" to="" influence="" its="" decision="" in="" that="" regard.="" alternative="" size="" standards="" sba="" considered="" two="" alternative="" size="" standards="" for="" this="" industry.="" one="" alternative="" considered="" was="" modifying="" the="" average="" annual="" receipts="" method="" to="" allow="" for="" pass-through="" funds="" received="" for="" employees="" (sometimes="" referred="" to="" as="" ``associates'').="" sba="" rejected="" this="" alternative="" because="" the="" industry="" characteristics="" are="" not="" similar="" to="" those="" industries="" which="" obtain="" gross="" revenues="" from="" commissions="" and="" fees.="" none="" of="" the="" five="" factors="" used="" in="" this="" evaluation="" supported="" making="" that="" change.="" also,="" since="" not="" all="" the="" factors="" supported="" the="" same="" size="" standard,="" but="" rather="" indicated="" a="" range="" of="" possible="" size="" standards,="" a="" second="" alternative="" considered="" was="" to="" select="" one="" of="" the="" other="" sizes="" from="" the="" range,="" either="" somewhat="" higher="" or="" lower="" than="" the="" one="" proposed.="" on="" balance,="" and="" given="" the="" characteristics="" of="" the="" industry,="" sba="" considers="" $10="" million="" the="" best="" interpretation="" of="" the="" data="" and="" the="" most="" supportable="" standard="" for="" this="" industry.="" sba="" welcomes="" comments="" on="" the="" proposed="" size="" standard="" for="" help="" supply="" services.="" if="" the="" public="" can="" show="" compelling="" reasons="" why="" a="" different="" size="" standard="" for="" this="" industry="" should="" be="" established="" or="" that="" it="" should="" weigh="" one="" factor="" higher="" or="" lower,="" sba="" will="" consider="" these="" reasons="" when="" developing="" the="" final="" rule.="" sba="" would="" also="" appreciate="" comments="" on="" its="" position="" that="" it="" should="" measure="" the="" receipts="" size="" of="" a="" help="" supply="" services="" firm="" on="" gross="" receipts.="" compliance="" with="" executive="" orders="" 12612,="" 12988,="" and="" 12866,="" the="" regulatory="" flexibility="" act="" (5="" u.s.c.="" 601-612),="" and="" the="" paperwork="" reduction="" act="" (44="" u.s.c.="" 3501="" et="" seq.)="" sba="" certifies="" that="" this="" rule,="" if="" adopted,="" would="" not="" be="" a="" significant="" rule="" within="" the="" meaning="" of="" executive="" order="" 12866="" since="" it="" will="" not="" have="" an="" impact="" of="" $100="" million="" or="" more.="" the="" total="" amount="" of="" federal="" procurement="" and="" sba="" guaranteed="" loans="" combined="" is="" less="" than="" $160="" million="" to="" this="" industry="" annually,="" and="" a="" change="" to="" the="" size="" standard="" is="" unlikely="" to="" significantly="" affect="" these="" programs.="" for="" purposes="" of="" the="" regulatory="" flexibility="" act,="" this="" rule="" would="" not="" have="" a="" substantial="" impact="" on="" a="" significant="" number="" of="" small="" entities.="" although="" potentially="" 576="" additional="" firms="" could="" gain="" small="" business="" status="" as="" a="" result="" of="" this="" rule,="" only="" a="" very="" small="" percentage="" of="" firms="" in="" the="" industry="" compete="" for="" federal="" procurements="" or="" obtain="" guaranteed="" loans="" through="" sba's="" financial="" assistance="" programs.="" for="" the="" purpose="" of="" the="" paperwork="" reduction="" act,="" 44="" u.s.c.="" 3501="" et="" seq.,="" sba="" certifies="" that="" this="" rule="" would="" not="" impose="" new="" reporting="" or="" recordkeeping="" requirements="" other="" than="" those="" already="" 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="" that="" order.="" list="" of="" subjects="" in="" 13="" cfr="" part="" 121="" government="" procurement,="" government="" property,="" grant="" programs--="" business,="" loan="" programs--business,="" small="" businesses.="" for="" reasons="" stated="" in="" the="" preamble,="" sba="" proposes="" to="" amend="" 13="" cfr="" part="" 121="" as="" follows:="" part="" 121--small="" business="" size="" regulations="" 1.="" the="" authority="" citation="" for="" part="" 121="" continues="" to="" read="" as="" follows:="" authority:="" 15="" u.s.c.="" 632(a),="" 634(b)(6),="" 637(a),="" 644(c)="" and="" 662(5).="" 2.="" in="" sec.="" 121.103,="" revise="" paragraph="" (b)(4),="" to="" read="" as="" follows:="" sec.="" 121.103="" what="" is="" affiliation?="" *="" *="" *="" *="" *="" (b)="" *="" *="" *="" (4)="" business="" concerns="" that="" lease="" employees="" from="" concerns="" primarily="" engaged="" in="" leasing="" employees="" to="" other="" businesses="" or="" that="" enter="" into="" a="" co-employer="" arrangement="" with="" a="" professional="" employer="" organization="" (peo)="" are="" not="" affiliated="" with="" the="" leasing="" company="" or="" peo="" solely="" on="" the="" basis="" of="" a="" leasing="" agreement.="" *="" *="" *="" *="" *="" 3.="" in="" sec.="" 121.201,="" under="" the="" division="" i--services="" heading="" of="" the="" ``size="" standards="" by="" sic="" industry''="" table,="" add="" a="" new="" entry="" for="" sic="" code="" 7363="" in="" numerical="" order="" to="" read="" as="" follows:="" sec.="" 121.201="" what="" size="" standards="" has="" sba="" identified="" by="" standard="" industrial="" classification="" codes?="" *="" *="" *="" *="" *="" size="" standards="" by="" sic="" industry="" ------------------------------------------------------------------------="" size="" standards="" in="" number="" of="" sic="" code="" and="" description="" employees="" or="" millions="" of="" dollars="" ------------------------------------------------------------------------="" *="" *="" *="" *="" *="" division="" i--services....................................="" $5.0="" except:="" *="" *="" *="" *="" *="" 7363="" help="" supply="" services...............................="" $10.0="" [[page="" 55878]]="" *="" *="" *="" *="" *="" ------------------------------------------------------------------------="" dated:="" october="" 7,="" 1999.="" aida="" alvarez,="" administrator.="" [fr="" doc.="" 99-26783="" filed="" 10-14-99;="" 8:45="" am]="" billing="" code="" 8025-01-p="">