[Federal Register Volume 60, Number 226 (Friday, November 24, 1995)]
[Proposed Rules]
[Pages 57982-58013]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-28449]
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SMALL BUSINESS ADMINISTRATION
13 CFR Part 121
Small Business Size Regulations
AGENCY: Small Business Administration.
ACTION: Proposed rule.
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SUMMARY: In response to President Clinton's government-wide regulatory
reform initiative, the Small Business Administration (SBA) has
completed a page-by-page, line-by-line review of all of its existing
regulations to determine which might be revised or eliminated. This
proposed rule would improve the Agency's size program by simplifying
and clarifying language in the existing rules, conforming these rules
to present SBA policies and practices, and providing some substantive
modifications to streamline the delivery of services to the public. The
revised regulations would be more understandable and much easier to
use. The proposed rule would reduce the number of sections. It would
make the definition of ``affiliation'' more concise. While no longer
recognizing an absolute right to appeal size determinations, it would
give the Office of Hearings and Appeals (OHA) discretionary authority
to accept size appeals. The proposed rule would improve language, but
would not change the existing size standards which apply to particular
industries.
DATES: Comments must be submitted on or before December 26, 1995.
[[Page 57983]]
ADDRESSES: Written comments should be addressed to David R. Kohler,
Regulatory Reform Initiative Team Leader, Attention: Part 121, Office
of General Counsel, Small Business Administration, 409 3rd Street,
S.W., Suite 13, Washington, D.C. 20416.
FOR FURTHER INFORMATION CONTACT: John W. Klein, Chief Counsel for
Special Programs, Office of General Counsel, at (202) 205-6645.
SUPPLEMENTARY INFORMATION: On March 4, 1995, President Clinton issued a
Memorandum to federal agencies, directing them to simplify their
regulations. In response to this directive, SBA has completed a page-
by-page, line-by-line review of all of its existing regulations to
determine which might be revised or eliminated. This proposed rule
would amend SBA's regulations governing its size program which was
authorized to be established by sections 3(a) and 5(b)(6) of the Small
Business Act, 15 U.S.C. 632(a), 634(b)(6). It is designed to streamline
the size standards operation by simplifying and clarifying existing
regulatory language and by eliminating unnecessary, irrelevant, or
obsolete provisions. SBA examined the purpose of each section of the
existing regulation in developing this proposal. Where appropriate, it
eliminated, consolidated, or rewrote sections for ease of use and
clarity. The proposed unnumbered substantive category headings would
be: Provisions of General Applicability, Size Standards Used to Define
Small Business Concerns, Size Eligibility Requirements for SBA
Financial Assistance, Size Eligibility Requirements for Government
Procurement, Size Eligibility Requirements for Sales or Lease of
Government Property, Size Eligibility for the Minority Enterprise
Development (MED) Program, Size Eligibility Requirements for the Small
Business Innovation and Research (SBIR) Program, Size Eligibility
Requirements for Paying Reduced Patent Fees, Size Eligibility
Requirements for Compliance with Programs of Other Agencies, Procedures
for Size Protests and Requests for Formal Size Determinations, Appeals
of Size Determinations and SIC Code Designations, Eligibility of
Organizations for the Handicapped for Small Business Set-asides, and
Waivers of the Nonmanufacturer Rule. The proposed rule would amend
office titles to reflect a previous reorganization of functions within
the structure of SBA.
SBA has attempted to rewrite Part 121 in plain English in order to
make the regulations more readable and less confusing. SBA has
identified the following eight significant changes proposed by this
rule.
Refine the definition of ``affiliation.'' The proposed rule at
Sec. 121.103(a) would make the definition of ``affiliation'' more
concise. The intent in revising the provisions pertaining to
affiliation is to make the definition easier to understand.
Additional exclusions from ``affiliation'' coverage. Four
additional exclusions from ``affiliation'' coverage are proposed in
Sec. 121.103(a)(2): (1) small businesses that are members of approved
pools for a joint program of research and development, (2) concerns
that lease employees from a concern whose principal business is leasing
employees to other businesses, (3) mentor/protege firms participating
in Federal Mentor-Protege programs, and (4) for purposes of eligibility
for the Small Business Investment (SBIC) program only, certain
investors in SBIC portfolio concerns, provided the investors do not
control the concern other than to the extent that would be permitted
for SBICs under the SBIC regulations (currently, Sec. 107.801 of this
title; in the revised SBIC regulations at Sec. 107.865).
Revision of ``annual receipts'' definition. This definition would
be simplified by incorporating figures already contained on a concern's
Federal Income Tax return for purposes of calculating a concern's
average annual receipts. In addition, amounts collected for another by
a conference management services provider or an advertising agent would
be excluded from a concern's annual receipts, similar to that of a
travel agent.
Grant OHA discretionary authority to hear size determination
appeals. Contracting officers for procuring agencies have cited
unwelcome delays in the procurement process when small business size
determinations are appealed to the Office of Hearings and Appeals
(OHA). Under existing SBA regulatory guidelines, a party which is
adversely affected by a size determination has the right to appeal the
determination to OHA. However, Federal Acquisition Regulations (48
C.F.R. 19.302) provide that a contracting officer is not required to
suspend award after a size determination is made even if the
determination is appealed to OHA, and further provide that the OHA
decision applies to a pending acquisition only if the decision is
received before award. Therefore, if the OHA decision is to have
relevance, it must be rendered prior to award. In an effort to
streamline consideration of size determinations and bring more speed to
the decision-making process, proposed Sec. 121.1101 would eliminate
appeals to OHA as a matter of right and instead give OHA discretion to
review such appeals. A size determination rendered by an authorized
Agency official would be considered final unless OHA agreed to review
the determination. This would give OHA the latitude to consider those
cases which have precedential value or which might involve clear error
of fact or law. Procedures for requesting discretionary review of size
determinations would be set forth in part 134.
Change the time when size is determined for MED application
purposes. Under the present regulations, an applicant to SBA's MED
program is small if, at the time of its application, it is small under
the size standard for its primary industry. The proposed regulation
would change the time for determining the applicant's size to the time
when SBA issues its eligibility determination. Thus, under the proposed
regulation, a concern which was small when it applied but which became
large during SBA's consideration of its application would not be
permitted to enter the program. SBA does not believe that it should
admit a concern to the MED program knowing that it is no longer small
in its primary business. The concern could no longer obtain 8(a) or
small business set-aside contracts in its primary industry, and the
concern could be perceived to be other than disadvantaged because of
that success. In addition, if that were the only business that the
concern was in, SBA would be put in the awkward position of admitting
the concern to the program one day, but initiating termination
proceedings from the program the next.
Use of size standards for programs of other agencies. This proposed
rule sets forth the limited circumstances under which the Secretary of
a department or the head of a Federal agency may prescribe, for the use
of such department or agency, a size standard other than one which has
been established by SBA.
Individual waivers of the ``Nonmanufacturer Rule.'' The proposed
rule establishes procedures for granting waivers of the Nonmanufacturer
Rule for individual products on specific solicitations. Procedures for
granting individual waivers would be combined with provisions
pertaining to class waivers.
Other changes to Part 121. This proposed rule would also make
changes in the size eligibility requirements which are identified below
in the section-by-section analysis. Several
[[Page 57984]]
typographical errors or inadvertent omissions would be corrected, and
several obsolete or irrelevant references would be eliminated. The
proposed rule would not make any changes in actual size standards
applicable to specific industries.
Section-by-Section Analysis
The following is a section by section analysis of each provision of
SBA's regulations that would be affected by this proposed rule:
The current Sec. 121.101 is a policy statement reciting
Congressional intent as set forth in the Small Business Act. SBA
proposes to revise Sec. 121.101 to state succinctly the purpose of
small business size standards.
Section 121.102 would be deleted and the substance of the provision
moved to the revised Sec. 121.101.
Present Sec. 121.201 would be deleted and the substance of
subsection (a) consolidated with proposed Sec. 121.101. Present
subsection (b) is a philosophical statement relating to Federal
assistance in general and would be eliminated as unnecessary. The
general outline of SBA's size program, contained in Sec. 121.202, would
be deleted as unnecessary since revised Sec. 121.101 would provide
general guidance as to the purpose of size standards and how SBA
establishes them. Revised Sec. 121.201 would detail specific size
standards, and revised Secs. 121.301 through 121.903 would describe the
relationship of size standards for specific types of Federal
assistance. Procedures for size protests and requests for size
determinations would be found in proposed Sec. 121.1001. Appeals of
size determinations and SIC code designations would be covered in
proposed Sec. 121.1100.
Section 121.102 would be amended to explain, in summary fashion,
how SBA develops or revises an industry size standard. Two criteria for
size standards have gained general acceptance since SBA's inception and
are the most widely used definitions of small business. The first is
the 500 employee size standard, which is the most common size standard
among the manufacturing and mining industries. Instituted by the
Smaller War Plants Administration and adopted with the formation of
SBA, it applies to a majority of these industries. The second is the
average annual receipts standard, which applies to most retail and
service industries and also dates back to the inception of SBA. In
1953, a limit of $1.0 million in average annual receipts was applied to
many of these industries. Over time, inflation and industry changes
have increased that original level to $5 million. Size standards for
particular industries deviate from these ``anchor standards'' depending
on the structural characteristics of the industry and other factors
described in SBA's rulemaking actions as important influences on an
industry's structure. Proposed Sec. 121.102 would identify the factors
SBA considers in setting any size standard, including degree of
competition in an industry, average firm size in the industry, start-up
costs and entry barriers in the industry, and distribution of firms by
size in the industry.
Section 121.203 would be deleted and the substance of the provision
would be contained in revised Sec. 121.1006(h)(3).
Section 121.204 would be deleted. The substance of the provision
would be incorporated in revised Secs. 121.1006(h)(3) and 121.1007.
Section 121.205 would be eliminated as unnecessary.
The subject of Secs. 121.301(a) and 121.301(b) would be transferred
to Sec. 121.102(b), with the provision amended for relevance. Section
121.301(c) would be deleted as unnecessary since proposed Sec. 121.201
would contain a statement that the general size standard for all
industries not listed in the table in Sec. 121.201 would be $5 million.
Sections 121.302 and 121.304 would be eliminated as unnecessary.
The roles of the Office of General Counsel and OHA are described in
Part 101 of SBA's regulations. Section 121.303 would be deleted, but
the address of the Size Policy Board would be contained in the revised
Sec. 121.102(c).
Section 121.305 would be eliminated. SBA has materially changed the
role of its regional offices, transferring to other SBA offices many of
the functions formerly performed by regional offices. The descriptions
of responsibilities with respect to size determinations and SIC code
designations would be transferred to revised Secs. 121.402 and
121.1002.
Definitions of terms, presently found in Secs. 121.401 through 407,
would be transferred to a new Sec. 121.103. Changes in some definitions
are proposed.
The definition of affiliation in current Sec. 121.401 would be
transferred to Sec. 121.103(a) and revised for clarity. Subsection
(a)(1) would be redesignated as Sec. 121.103(a)(1)(iii). Subsections
121.401(a)(2)(i) and (ii) would be redesignated as subsection
121.103(a)(1)(i)(A) and (B). Provisions addressing ``identity of
interest'' now found in Secs. 401(a)(2)(iii) and 401(d) would be
transferred to the policy statement contained in proposed
Sec. 121.103(a)(1)(i)(C). The term is a legitimate concept in
characterizing affiliation among parties, but it is dependent on
specific facts in its application and is subject to a high degree of
subjectivity in much of its implementation. While simpler, the
designation of a list of family relationships that would always cause
an ``identity of interest'' would penalize a number of legitimate small
concerns. Close familial relationships are at times offset by
estrangement of the parties. Under the circumstances, SBA has
determined that a flexible approach should be retained in the size
regulations.
Section 121.401(b), pertaining to exclusions from the definition of
affiliation, would be transferred to a new Sec. 121.103(a)(2) which
would list and describe seven exclusions.
In addition to the exclusion from affiliation for SBICs or
Development Companies, the proposed rule would add a second exclusion,
for purposes of SBIC assistance, for concerns owned by venture capital
firms, pension funds, and certain charitable entities exempt from
federal taxation under Sec. 501(c) of the Internal Revenue Code. Like
SBICs, these entities often make financial investments in small
companies when they receive ownership positions which can be held for
subsequent resale. The same control limitations imposed by SBA on SBICs
would be imposed on the investors covered by this affiliation
exclusion.
The exclusion for business concerns owned and controlled by Indian
Tribes, Alaska Regional or Village Corporations organized pursuant to
the Alaska Native Claims Settlement Act, or Native Hawaiian
Organizations would be clarified so that affiliation would not be found
solely by reason of such ownership, but still could be found where
other grounds (e.g., common management) exist.
The exclusion for businesses owned or controlled by Community
Development Corporations was added to SBA regulations on June 7, 1995,
and would be retained with only minor editorial adjustments.
The proposed rule would add an exclusion be for small businesses
that are members of pools approved by the Administrator, after
consultation with the Attorney General and the Chairman of the Federal
Trade Commission, for a joint program of research and development.
Concerns which are members of such pools would not be considered
affiliated with other pool members solely by reason of their joint
participation on pool approved activities. Such pools have been
statutorily authorized for some time, but there has not been a
corresponding
[[Page 57985]]
exclusion from affiliation specifically recognized in the size
regulations.
The proposed rule would also add an exclusion from affiliation for
concerns that lease administrative and/or other employees from a
concern whose principal business is leasing employees to other
businesses. The two concerns would not be considered affiliated solely
by reason of the leasing agreements.
Finally, the proposed rule would add an exclusion for firms
participating in Federal Mentor-Protege Programs. Although affiliation
would not be found based solely on such mentor-protege relationship,
affiliation could be found to exist based on other factors.
Section 121.401(c), pertaining to the nature of control, would be
eliminated in the revised affiliation rule. Affiliation by stock
ownership and common management would be addressed in proposed
Secs. 121.103(c) and (d). The non-essential elements of affiliation
expressed in current subsection 401(c) would be eliminated without
sacrificing clarity or definitiveness.
Section Sec. 121.401(e), redesignated as Sec. 121.103(c), would be
clarified.
Section 121.401(f), redesignated as Sec. 121.103(d), would clarify
what constitutes an agreement in principle, and make other minor
editorial changes.
Section 121.401(g) now requires SBA to determine whether a voting
trust was entered into primarily for a ``legitimate purpose.'' Since
such a requirement is unnecessary and overly subjective, it would be
eliminated.
The proposed rule would redesignate Sec. 121.401(h), pertaining to
common management, as Sec. 121.103(e), and clarify that common
management must control both the firm whose size status is at issue and
one or more other concerns in order to constitute affiliation. It would
eliminate the references to key employees, but provide that affiliation
can exist where the chief executive officer, one or more general
partners, or one or more members of the board of directors, control the
board of directors or management of another concern.
The proposed rule would eliminate Secs. 121.401(i) and (j) as
separate bases for affiliation. Most firms simply sharing common
facilities do not act in concert, and SBA believes that there is little
likelihood of abuse if this provision is eliminated. Similarly, the
``newly organized concern'' basis for affiliation seldom appears alone,
and its elimination as a separate basis for affiliation would not
eliminate the underlying reasons for finding affiliation on other
grounds.
Section 121.401(k) would be eliminated as a separate basis for
affiliation, but referenced as a factor that may cause affiliation
under the totality of circumstances in proposed Sec. 121.103(a)(2).
Affiliation through joint ventures would be moved from
Sec. 121.401(l) to Sec. 121.103(f). The proposed rule would eliminate a
specific definition of the term joint venture as unnecessary. The
current regulations unintentionally define a joint venture as being
formed for a single, specific contract. SBA believes it to be obvious
that a joint venture may be formed to carry out more than one contract,
and the regulation will be so implemented. The revision also would be
reworded for brevity and clarity.
The provisions of Secs. 121.401(l)(2) and (3) would be redesignated
as Secs. 121.103(f)(1) and (2), respectively. The provisions would be
reworded for clarity, and provisions not affecting the substantive rule
would be eliminated.
Section 121.401(l)(4) (proposed Sec. 121.103(f)(3)) would be
amended in two respects. It would clarify that whether a subcontractor
should be considered a joint venturer depends on all circumstances
pertaining to the subcontract arrangement between the parties and does
not hinge solely on the percentage of subcontracted work. For example,
the fact that a subcontractor is to perform a relatively large
percentage of the total value of the contract might not cause SBA to
consider the arrangement a joint venture where the prime contractor
would be actively engaged in the performance of the contract and would
exercise a supervisory role. In addition, subcontractors that supply
materials may be distinguished from subcontractors that perform work.
For example, a small business construction contractor would not be
deemed an affiliate of a large subcontractor from which needed asphalt
constituting more than 50 percent of the value of the contract was
purchased where the large business was scheduled to perform no work on
the contract other than the cost of the asphalt.
Section 121.401(l)(5) would be reworded for clarity and
redesignated as Sec. 121.103(f)(4).
The franchise rule in Sec. 121.401(m) would be rewritten for
clarity and redesignated as Sec. 121.103(g).
The proposed rule would revise ``annual receipts'' in proposed
Sec. 121.104 (current Sec. 121.402) to mean gross or total income plus
cost of goods sold as reported on a concern's Federal income tax
return. The term is meant to include revenue from the sale of products
or services, interest, dividends, rents, royalties, fees, commissions,
or other income. The same allowances and proceeds collected for another
concern currently subtracted from receipts would continue to be
subtracted in the proposed rule. Accordingly, the size of a concern
would be based upon the information shown on the Federal income tax
return, as opposed to the present requirement of utilizing its regular
books of account. SBA specifically requests comments on this proposed
definition. Because SBA would use a concern's income tax return to
determine ``receipts,'' the concern would not be required to restate
its revenue under the accrual basis of accounting if its return was
filed other than under the accrual method as is presently the case.
The proposed rule would also exclude from the calculation of annual
receipts amounts collected for another by conference management
services firms. This action is being taken to better measure the
magnitude of operations of conference management services providers. In
response to a decision of the United States District Court for the
District of Columbia (Civil Action No. 91-1569), the proposed rule
would also exclude such ``pass-through'' amounts would also be excluded
for advertising agents.
The SBA reviews requests to exclude revenues of certain business
activities on a case-by-case basis. In an August 25, 1992 proposed rule
(See 57 FR 38452), SBA noted characteristics under which it might be
appropriate to exclude from a concern's revenues certain funds received
from a client firm to be transmitted to an unaffiliated third party.
These include the following five characteristics:
(1) A broker or agent-like relationship between a firm and its
third party provider exists that represents a dominant or crucial
activity of firms in these industries.
(2) The pass-through funds associated with the broker or agent-
like relationship is a significant proportion of total receipts.
(3) As the normal business practice of firms in the industry, a
firm's income remaining after the pass-through funds are remitted to
a third party is typically derived from a standard commission or
fee.
(4) Firms do not usually consider billings that are reimbursed
to other firms as their own income, preferring instead to count only
those receipts that are retained for their own use.
(5) Federal government agencies which engage in the collection
of statistics and other industry analysts usually represent receipts
of the firms on an adjusted receipts basis.
An analysis of the conference management services industry suggests
that most of these characteristics are shared by concerns active in
this industry. Conference management
[[Page 57986]]
services firms provide a range of services in support of organizing and
facilitating conferences, such as travel, lodging, ground
transportation, honoraria and other administrative support services.
The sponsoring organization is responsible for developing the
conference and its contents and for all conference expenses. The
conference management service provider principally acts as an agent on
behalf of the sponsoring organization by arranging for various support
services in connection with the conference and provides few, if any, of
the support services itself. The arrangements made through the
conference management services provider to a third party provider are
paid using the sponsoring organization's funds or by the conference
management services provider and later reimbursed by the sponsoring
organization. The pass-through monies paid to third-party providers
generally account for a majority of the total expenses incurred by the
conference management services provider. The conference management
services provider's earnings are based on fees or commissions from
these activities.
The scope of activities and business operations of conference
management services providers appear to conform with the
characteristics outlined above to support the exclusion of funds
received in trust for an unaffiliated third party. The SBA believes
that the revenues a conference management services provider received
for a third party provider represents revenues intended for the third
party. Accordingly, an exclusion of these types of revenues is
warranted. The fees and commissions earned by the conference management
services provider from its activities is also a more representative
measure of the magnitude of operations of the firm and of the services
provided.
Before a final decision is made on the exclusion of pass-through
revenues for conference management services firms, the SBA would find
additional information helpful on the practices of firms in the
conference management services industry. In particular, the SBA seeks
comments from the public concerning the typical relationship between
clients of conference managers and conference management services
providers themselves. Pertinent information would include:
(1) To what extent are funds passed through to other vendors in
this industry, particularly the extent of booking costs for
transportation, lodging and meeting room space?
(2) To what extent are funds ``escrowed'' in which the client
firm provides an account to be used by the conference facilitator to
``perform a condition'' and meet ongoing expenses? What is the
typical nature of these accounts in ownership and liability terms?
(3) Are conferences typically planned by the client firm or the
independent conference planner? Who prepares the program and selects
the speaker? Does the conference management services provider
usually act as a mere facilitator or as a planner in which the
entire production would be planned by the conference management
services provider?
(4) How does the conference management services provider recover
costs and make profits? Are arrangements normally on a cost-plus
fixed-fee basis, a standard commission basis or fixed price?
This proposed rule does not change the current size standard of
$5.0 million applicable to firms in SIC 8741, Management Services.
However, if pass-through funds are excluded from the calculation of
revenues for conference management services firms as proposed, it would
effectively increase the size standard applicable to these type of
firms. At this time, the SBA does not have available data to determine
if the $5.0 million size standard continues to be appropriate for the
conference management services industry. Accordingly, the SBA is also
seeking information on the economic characteristics of conference
management services firms, such as average firm size, the degree of
concentration, the size distribution of firms, start-up costs and the
difficulty of entry. Other information which may influence the size
standard, and the need for a new size standard, may also be submitted.
The SBA will consider this information to assess the appropriateness of
the current size standard, which may lead to a future rulemaking
proposing a different size standard than $5.0 million.
This proposed rule would also clarify that SBA may use all
available information to determine annual receipts when making a size
determination, especially if other information is available which
disputes a firm's Income Tax returns.
Section 121.402(e)(i) would be redesignated as Sec. 121.104(d) and
amended to add language indicating that the annual receipts for a
concern and its affiliates are calculated in accordance with proposed
Sec. 121.104(b) even though this may result in different time frames
being used to calculate the concern's and affiliate's revenues.
Sections 121.403(a) and (b) would be redesignated as
Secs. 121.105(a) and (b), respectively, and revised for clarity. A new
subsection (c) would be added to make it clear that if one entity is
replaced by another having the same assets and liabilities, the
successor firm is not a new entity for purposes of calculating annual
receipts/employees.
The current definition of employees in Sec. 121.404 would be
combined with the definition of number of employees in Sec. 121.407
into proposed Sec. 121.106, and rewritten for clarity. The proposed
rule would eliminate the list of numerous factors bearing on the issue
of whether individuals are employees of a concern or employees of an
independent employment contractor, and simply authorize SBA to look at
all relevant factors concerning the issue.
The provisions of Sec. 121.406 would be eliminated as unnecessary.
Language indicating that dominance is taken into account in the setting
of industry size standards would be added to proposed Sec. 121.102.
The proposed rule would add a new Sec. 121.107 which states the
existence of statutory penalties for misrepresentations of size status.
The substance of Sec. 121.601 would be redesignated as
Sec. 121.201, which would be amended to eliminate unnecessary language.
The size standards table identified by SIC industry would be
greatly streamlined. The redesigned size standard table would list the
size standard applying to each Division within the SIC System and each
Major Group within that Division if different from the general Division
size standard. Only those industries having a size standard different
from the applicable Division or Major Group size standard, or those to
which a footnote applies, would be specifically listed in the table by
four-digit SIC code. This change would eliminate the duplication of
listing four-digit SIC code after four-digit SIC code within a Division
or Major Group with identical size standards.
The asterisks identifying new SIC codes for 1987 would also be
eliminated from the table as no longer relevant or useful.
Many of the footnotes to the size standards in proposed
Sec. 121.201 would be clarified and simplified. Some footnotes have
been deleted resulting in the need to renumber remaining ones as
identified below. Size standards themselves would not be amended by
this proposed rule.
Footnote 1 would be deleted as unnecessary. The Table of Size
Standards itself, as well as the introductory language to the Table,
indicates that size standards are in number of employees or average
annual receipts unless otherwise specified.
Footnote 2, redesignated as footnote 1, would be clarified to
indicate that the 40 percent requirement in the footnote
[[Page 57987]]
applies to government procurement only.
Footnotes 3, 4, and 5, redesignated as footnotes 2, 3, and 4,
respectively, would be reworded for clarity.
Footnote 6, redesignated as footnote 5, would be amended by
replacing the words ``which it manufactured worldwide'' with the words
``comprising its total worldwide manufacture'' to clarify that SBA
intended no difference in the application of those words.
The substance of footnote 7 would be transferred into the size
standard table for SIC code 4212, and the footnote eliminated.
Footnote 8 would be incorporated into the Table, and eliminated as
a separate footnote.
Footnote 9 would be eliminated as unnecessary.
Footnote 10, redesignated as footnote 6, would clarify that gross
commissions of a travel, real estate or advertising agency are to be
counted when determining such a concern's size, whether paid directly
(e.g., through some sort of escrow account) or indirectly (i.e.,
received first by the agency and then paid to the individual) to
individual agents of the concern. SIC codes relating to advertising
agents (SIC codes 7311, 7312, 7313, and 7319) and that part of SIC code
8741 dealing with conference management service providers would be
added to this footnote.
The substance of footnotes 11 and 12 would be incorporated into the
size standard table for SIC codes 4212 and 5599 respectively, and the
footnotes eliminated.
Footnote 13 would be deleted as duplicative of restrictions on
financial assistance covered in Part 120.
Footnote 14, redesignated as footnote 6, would be revised to
incorporate the substance of existing Secs. 121.1402(a) and (b).
Footnote 15, redesignated as footnote 7, would be rewritten for
clarity.
Footnote 16 would be eliminated and its substance combined with the
statement at the beginning of the size standards chart dealing with the
$5 million alternate size standard.
Footnotes 17, 18 and 20 would be clarified for ease of use and
renumbered as footnotes 9, 10, and 12, respectively.
Footnotes 21 and 22 would be incorporated into the size Table, and
eliminated as separate footnotes.
Footnote 23 would be redesignated as footnote 13.
Sections 121.801 and 121.802 (proposed Secs. 121.301 and 121.302)
would be amended for clarity and ease of use. The proposed rule would
eliminate differentials in size standards for Redevelopment Areas.
Differentials for Redevelopment Areas would be eliminated because
almost all counties are so designated, and such designations tend to be
permanent or long lasting designations once designated.
Section 121.803(a) (proposed Sec. 121.303(a)) would be amended to
clarify that the size of an applicant for financial assistance is
determined as of the date the application for such assistance is
received by SBA (or, in the case of the preferred lenders program, the
date of approval of the loan by the Preferred Lender).
The current Sec. 121.803(b) would be eliminated since it is covered
in revised Sec. 121.103(d).
Section 121.803(c), redesignated as Sec. 121.303(b), would be
rewritten for clarity.
Sections 121.804 through 121.806 (proposed Secs. 121.304 through
121.306) would be rewritten for clarity and ease of use. SBA's
Government Contracting Area Directors also would be substituted for
staff in regional offices. They are familiar with size issues and
principles because of their work in the government procurement area and
have sufficient knowledge and expertise to make size determinations
pertaining to financial assistance.
Proposed Sec. 121.307 would clarify that a MED concern which
qualifies for award of a specific 8(a) subcontract would be eligible
for SBA financial assistance to finance the subcontract.
Section 121.901, redesignated as Sec. 121.401, would clarify that
it covers MED issues, but that additional size issues pertaining to the
MED program are discussed in Secs. 121.601 through 121.604.
Sections 121.902 and 121.903 would be redesignated as Secs. 121.402
and 121.403, respectively, and revised for clarity.
Section 121.904, redesignated as Sec. 121.404, would be rewritten
for clarity and ease of use. The substance of subsection 121.904(b) has
been transferred to proposed Sec. 121.103(a)(4). Subsection (c) has
been eliminated, and subsection (d) redesignated as subsection (b).
This section would also call for determining size as of the date of
best and final offers in negotiated procurements (rather than the date
of self-certification) when a size protest alleges that a small
business dealer is not supplying the product of a small business
manufacturer or that a small business' subcontracting plan creates a
joint venture that should be considered large. A concern's proposed
supplier or subcontractors often will change during the process of
negotiation, and it is unreasonable to expect subcontracting plans to
be finalized at the time a concern self-certifies and submits its
initial offer on the solicitation.
Sections 121.905 and 121.906, redesignated as Secs. 121.405 and
121.406, respectively, would be amended for clarity and ease of use.
Section 121.907 would be redesignated as Sec. 121.407, with the
example deleted as unnecessary.
Section 121.908 would be redesignated as Sec. 121.408. Subsections
(a) and (b) would be consolidated and would clarify that a formal size
determination is required if the size status of an applicant for a COC
is at issue. Subsection (c) would be eliminated as duplicative (see
Sec. 121.404), and subsection (d) redesignated as subsection (b).
Section 121.909 would be redesignated as Sec. 121.409.
Section 121.910 would be redesignated as Sec. 121.410. Minor
editorial changes and a corrected cross-reference would be made in
subsections (a) and (b). Language referring to subcontracting for
financial services under section 8(d) of the Small Business Act would
be transferred to a new subsection (c).
Section 121.911 would be redesignated as Sec. 121.411, and
rewritten for clarity. Cross-references to sections would be corrected
and a clarification made that prime contractors must notify
unsuccessful offerors for Section 8(d) subcontracts of the apparent
successful offeror to enable unsuccessful offerors to timely protest
the size of the apparent successful offeror where appropriate.
A new Sec. 121.412 would be added to the regulations to clarify
that a concern must meet the applicable size standard only for that
portion of a partial small business set-aside that is set-aside for
small business. The concern is not required to qualify as a small
business for that portion of a requirement that is open to both small
and large business concerns. For instance, to be eligible as a small
business concern for petroleum refining in SIC Code 2911, a concern is
required to refine 90 percent of the petroleum from either crude oil or
bona fide feedstocks. On a partial small business set-aside, a concern
would have to meet this requirement on the portion of the offer that is
set-aside, but would not have to meet this requirement on the
unrestricted portion.
Sections 121.1001 through 121.1003 would be redesignated as
Secs. 121.501 through 121.503, and reworded for clarity.
Section 121.1004(a) would be redesignated as Sec. 121.504, and
reworded for clarity. The substance of subsection
[[Page 57988]]
(b) would be transferred to proposed Sec. 121.103(a)(4).
Section 121.1005 would be redesignated as Sec. 121.505, and
reworded for brevity.
Proposed Sec. 121.506 consolidates definitions (important for sales
and leases of Government-owned timber) that are presently contained in
different sections.
Section 121.1006, redesignated as Sec. 121.507, clarifies that the
Alaskan resale limitation applies when the original purchaser, and not
necessarily the repurchaser, is an Alaskan business.
Sections 121.1006 through 121.1010 would be renumbered as
Secs. 121.507 through 121.511, and reworded for clarity and brevity.
Section 121.1011, redesignated as Sec. 121.512, would clarify that
SBA considers a concern's affiliates in determining the size of a
stockpile purchaser.
Sections 121.1012 and 121.1013 would be redesignated as
Secs. 121.513 and 121.514, respectively, and amended for clarity and
brevity.
Section 121.1101 would be eliminated as unnecessary.
Section 121.1102 would be reorganized for clarity. The substance of
subsections (a)(1), (a)(2), and (b)(1) would be redesignated as
Secs. 121.601, 121.604(a), and 121.603, respectively. The substance of
subsections (b)(2), (c) and (d) would be consolidated into
Sec. 121.402.
Section 121.1103 would be reorganized for clarity. The substance of
subsections (a), (b), and (c) would be redesignated as Secs. 121.602,
121.604(a), and 121.605, respectively. The substance of subsection (d)
would be consolidated into Sec. 121.404(b).
Section 121.1104 would be redesignated as Sec. 121.604, and amended
for clarity.
Sections 121.1105 and 121.1106 would be consolidated into
Secs. 121.405 and 121.406, respectively.
The substance of 121.1108 would be redesignated as Sec. 121.605.
Section 121.1201 would be redesignated as Sec. 121.701 and the
definition of funding agreement in Sec. 121.1202(b) would be moved to
this section in order to keep definitions in one place.
Section 121.1202 would be redesignated as Sec. 121.702 and the
language would be simplified.
Section 121.1203 would be redesignated as Sec. 121.703 and
rewritten for clarity.
Section 121.1204 would be redesignated as Sec. 121.704. The
reference to a firm of more than 500 employees being ineligible for
award would be deleted as duplicative of revised Sec. 121.702. Section
121.1205 would be redesignated as Sec. 121.705 and amended for clarity.
Sections 121.1301 through 121.1305 would be redesignated as
Secs. 121.801 through 805, respectively, with slight changes for
clarity.
Sections 121.1401 through 121.1405 would be deleted as unnecessary
since size eligibility of financial institutions for subcontracting
purposes would be addressed in proposed Sec. 121.410(c) and footnote 9
of proposed Sec. 121.201.
Section 121.1501, redesignated as Sec. 121.901 and rewritten for
clarity, would address the procedures for size determinations and
discretionary appeals currently set forth in Sec. 121.1505.
Sections 121.1502 and 121.1503 would be consolidated into a new
Sec. 121.902.
A proposed amendment of Sec. 121.1502 was published in the Federal
Register (58 Fed. Reg. 44620) for public comment on August 23, 1993. It
would have implemented Section 222 of Public Law 102-366, amending the
Small Business Act, to delineate the limited circumstances under which
a Federal department or agency may prescribe its own standard for
determining whether an entity is a small business concern. After
reviewing public comments, SBA has decided to publish for further
comment a new proposal for the rule as part of this proposed rule.
After publication of the initial proposal, Congress modified
Section 3(a)(2) of the Small Business Act further, thereby affecting
two aspects of the proposed rule (See Sec. 301, Public Law 103-403).
Public Law 103-403 modified the time period for determining the size of
a manufacturing concern from ``over a period of not less than three
years'' to ``a manufacturing concern's pay periods for the preceding 12
months.'' This modification makes the time period of measurement of a
manufacturing concern's size consistent with the time period used by
SBA in calculating the size of other business concerns subject to an
employee-based size standard. Public Law 103-403 then expanded upon the
types of size standard measures that could be used for certain
industries. While Sec. 301 requires that the number of employees be
used to determine the size of a manufacturing concern, and gross
receipts used to determine the size of concerns providing services,
Sec. 301 permits these or some other measure of size to be used for
size standards for all other industry categories (e.g., retail trade,
wholesale trade, and construction). Other measures of size standards
could include net worth, net income, or some other quantitative measure
that appropriately delineates business concerns by size. These
statutory modifications have been incorporated into this final rule.
The current statutory provisions under Section 3(a)(2) of the Small
Business Act establish certain requirements for the development of size
standards by a Federal department or agency. Those requirements would
be repeated in the regulations under this proposal. The head of a
Federal department or agency may only prescribe a size standard
different from that prescribed by SBA when it is for use in connection
with a program of the department or agency, and other statutory
criteria are met.
SBA proposes to adopt appropriate measures to implement this
statutory authority. As stated in revised Sec. 121.901, SBA applies the
rules and procedures contained in this regulation when making size
determinations for other agencies. This includes the definition of the
size standard measure as well as all other criteria related to the size
standard. SBA will consider the use of alternative definitions and
other size related criteria by other agencies where appropriate. As
required by statute, SBA also is publishing a list of non-SBA size
standards currently in effect. The list contained in this proposed rule
will be updated periodically by notices published in the Federal
Register as non-SBA size standards become established or when
additional existing non-SBA size standards are identified. The current
list is as follows:
Table of Statutory and Regulatory Size Standards Set by Agencies Other Than SBA
----------------------------------------------------------------------------------------------------------------
Agency/Program Size standard Cite
----------------------------------------------------------------------------------------------------------------
Bureau of Land Management, Timber SBA size standards........... 43 CFR 5400.0-5
Sales.
Department of Agriculture, SBIR Fewer than 500 employees; all 7 CFR 3403.2(o)
program. requirements of 13 CFR 121.
[[Page 57989]]
Department of the Air Force, SBA size standards........... 32 CFR 841.4
Licensing Government-Owned
Inventions.
Department of the Army, Timber Sales. SBA size standards........... 32 CFR 644.509
Department of Commerce, International ``Small business'' means any 19 CFR 353.12
Trade Administration, Antidumping business concern which, in
Duty Procedures. the agency's judgment, due
to its small size, has
neither adequate internal
resources nor financial
ability to obtain qualified
outside assistance in
preparing and filing
petitions and applications
for remedies and benefits
under trade laws. (19 USC
1339).
Department of Commerce, International ``Small business'' means any 19 CFR 355.12
Trade Administration, Countervailing business concern which, in
Duty Procedures. the agency's judgment, due
to its small size, has
neither adequate internal
resources nor financial
ability to obtain qualified
outside assistance in
preparing and filing
petitions and applications
for remedies and benefits
under trade laws. (19 USC
1339).
Department of Commerce, Licensing SBA size standards........... 37 CFR 404.3
Government-Owned Inventions.
Department of Commerce, Patent Rights SBA size standards........... 37 CFR 401.14
Clause.
Department of Commerce, Rights to SBA size standards........... 37 CFR 401.2
Inventions.
Department of Defense, Business Type 13 CFR part 121.............. 48 CFR 252.211-7020
Certification--Commercial Items.
Department of Defense, Contract Goals Section 8(d) of the Small 10 USC 2323
for Small Disadvantaged Businesses. Business Act.
Department of Defense, Notice of 13 CFR part 121.............. 48 CFR 252.219-7001
Partial Small Business Set-aside.
Department of Energy, Domestic ``[A]s defined by SBA''...... 10 CFR 760.1
Uranium Project.
Department of Energy, Electric and 13 CFR 121.310............... 10 CFR 791.3
Hybrid Vehicle Research,
Development, Demonstration and
Production Loan Guaranties.
Department of Energy, Financial Not dominant in its field; 10 CFR 600.3
Assistance Rules. independently owned and
operated; meets criteria of
SBA.
Department of Energy, Financial Not dominant in its field; 10 CFR 600.3
Assistance Rules--Grants. independently owned and
operated; meets criteria of
SBA.
Department of Energy, Geothermal Loan Not dominant in field; does 10 CFR 790.5
Guaranty Program. not have assets in excess of
$9 million or net worth in
excess of $4 million; does
not have average net income,
after Federal income tax,
for the preceding 2 years in
excess of $400,000.
Department of Energy, Patent Rights 13 CFR 121.3-8, 121.3-12..... 10 CFR 600.33
of Grantees.
Department of Energy, State Energy SBA regulations.............. 10 CFR 420.2
Conservation Program.
Department of Housing and Urban SBA size standards........... 24 CFR 135.5
Development, Employment
Opportunities for Businesses and
Lower Income Persons in Connection
with Assisted Projects.
Department of Labor, OSHA, 19 or fewer employees........ 29 CFR 1910.1027(p)(2)
Occupational Safety and Health
Standards, Cadmium.
Department of Transportation, Section 3 of the Small 49 CFR 23.62
Implementation of Sec. 105(f) of Business Act and SBA
the Surface Transportation regulations, except that a
Assistance Act of 1982. small business concern will
not include any concern or
group of concerns controlled
by the same socially and
economically disadvantaged
individual(s) which has
average annual gross
receipts in excess of $15
million over the previous 3
fiscal years (amount is
increased annually for
inflation).
Department of Transportation, Size See note below for size 49 CFR 23.89
Standards for Airport standards for specific
Concessionaires. airport concessionaires.
Department of Transportation, Uniform Small business is a business 49 CFR 24.2(t)
Relocation Assistance and Real having not more than 500
Property Acquisition for Federal and employees working at the
Federally Assisted Programs. site being acquired or
displaced by a project or
program, which site is the
location of economic
activity. Sites occupied
solely by outdoor
advertising signs, displays,
or devices do not qualify as
a business.
Environmental Protection Agency, Section 3 of the Small 40 CFR 30.6015
Cooperative Agreements and Superfund Business Act.
State Contracts for Superfund
Response Actions.
Environmental Protection Agency, SBA size standards........... 40 CFR 21.2
Issuance of Statements Required by
Sec. 7(g) of the Small Business Act.
Environmental Protection Agency, Small Business Act........... 40 CFR 33.005
Procurement Under Assistance
Agreements.
Environmental Protection Agency, 100 employees................ 42 USC 7661(f)
Stationary Source Technical and
Environmental Compliance Assistance
Program.
Family and Medical Leave Act......... Fewer than 50 employees...... Public Law 103-1, Sec. 101
[[Page 57990]]
FAR, Patent Rights, Retention by Section 2 of the Small 48 CFR 52.227-11
Contractor (Short Form). Business Act and SBA
regulations.
FAR, Patent Rights, Retention by Section 2 of the Small 48 CFR 52.227-12
Contractor (Long Form). Business Act and SBA
regulations.
FAR, Patent Rights Under Government 16 USC 632 and SBA 48 CFR 27.301
Contracts. regulations.
FAR, Size Standards.................. SBA size standards........... 48 CFR 19.102
FAR, Small Business Competitiveness Emerging small business: size 48 CFR 19.1002
Demonstration Program. is no greater than 50% of
numerical SIC size standard.
FAR, Socioeconomic Programs.......... 13 CFR 121 and not dominant 48 CFR 19.001
in field.
FAR, Utilization of Small Business Section 3 of the Small 48 CFR 52.219-8
Concerns and Small Disadvantaged Business Act and SBA
Business Concerns. regulations.
General Services Administration, 13 CFR part 121.............. 48 CFR 552.219-1
Small Business Concern
Representation.
Internal Revenue Service, Dollar- Average annual gross receipts 26 CFR 1.472-8
value Method of Pricing LIFO of the taxpayer for the 3
Inventories. preceding taxable years do
not exceed $5 million.
Internal Revenue Service, Loss on (1) Post-1978 stock: capital 26 CFR 1.1244(c)-2
Small Business Stock. receipts of small business
corporation may not exceed
$1 million (capital receipts
means aggregate dollar
amount received by the
corporation for its stock).
(2) Pre-1978 stock: sum of
aggregate amount to be paid
for pre-1978 stock may not
exceed $500,000.
Internal Revenue Service, S Fewer than 35 shareholders; 26 CFR 1.1361-1
Corporation Defined. no shareholder (other than
an estate or trust) who is
not an individual; no
nonresident alien as
shareholder; only one class
of stock.
Internal Revenue Service, Simplified Average annual gross receipts 26 USC 474
Dollar-value LIFO Method for Certain of the taxpayer for the 3
Small Businesses. preceding taxable years do
not exceed $5 million.
Internal Revenue Service, Subchapter Fewer than 35 shareholders; 26 USC 1361(b)(1)(A)
S Corporation. no shareholder (other than
an estate or trust) who is
not an individual; no
nonresident alien as
shareholder; only one class
of stock.
International Trade Commission, Trade SBA size standards........... 19 CFR 213.2
Remedy Assistance.
Interstate Commerce Commission, Small Business Act........... 49 USC 10701
Negotiated Rates Act.
NASA, Licensing of Inventions........ 13 CFR 121.3-8 and 121.3-12.. 14 CFR 1245.202
NASA, Patent Rights--Retention by 13 CFR 121.3-8 and 121.3-12.. 14 CFR 1260 App.
Grantee.
National Science Foundation, Patent 13 CFR 121.3-8 and 121.3-12.. 45 CFR 650.4
Rights of Grantee.
Patent and Trademark Office.......... 13 CFR 121.12................ 37 CFR 1.9
Regulatory Flexibility Act........... Section 3 of the Small 5 USC 601
Business Act, unless an
agency, after consultation
with the Office of Advocacy
of SBA and after opportunity
for public comment,
establishes one or more
definitions of such term
which are appropriate to the
activities of the agency and
publishes such definition(s)
in the Federal Register.
Securities & Exchange Commission, Small business issuer- 17 CFR 228.10
Integrated Disclosure System for revenues less than $25
Small Business Issuers. million; US or Canadian
issuer; not an investment
company; if a majority owned
subsidiary, parent
corporation must also be a
small business issuer.
Securities & Exchange Commission Small business issuer- 17 CFR 240.12b-2
Registration and Reporting. revenues less than $25
million; US or Canadian
issuer; not an investment
company; if a majority owned
subsidiary, parent
corporation must also be a
small business issuer.
Selective Service, Placement of 500 employees................ 50 App. USC 468(a)
Orders.
Federal Communications Commission, $40 million in average annual 47 CFR 24.720(b)(1)
Licensing of Broadband Personal gross revenues.
Communications Services.
Federal Communications Commission, $40 million in average annual 47 CFR 24.320(b)
Licensing of Narrowband Personal gross revenues and $40
Communications Services. million in personal net
worth.
Federal Communications Commission, $40 million in average annual 47 CFR 21.961(b)
Licensing of Multipoint Distribution gross revenues.
Services (Wireless Cable).
Federal Communications Commission, Small cable systems of 15,000 47 CFR 76.901(c)
Regulatory Relief for Small Cable or fewer subscribers owned
Entities. by cable companies with
400,000 or fewer subscribers.
Nuclear Regulatory Commission, $5 million in average annual 10 CFR 2.810
Regulatory Flexibility Analyses. gross revenues for concerns
providing services and 500
employees for manufacturing
concerns.
Department of the Treasury, Office of $1 million in average annual 12 CFR 25.22(b)(3)
the Comptroller of the Currency, gross revenues.
Community Reinvestment Act.
Department of the Treasury, Office of $1 million in average annual 12 CFR 563e.22(b)(3)(iii)
Thrift Supervision, Community gross revenues.
Reinvestment Act.
Board of Governors of the Federal $1 million in average annual 12 CFR 228.22(b)(3)(ii)
Reserve System, Community gross revenues.
Reinvestment Act.
[[Page 57991]]
Federal Deposit Insurance $1 million in average annual 12 CFR 345.22(b)(3)(ii)
Corporation, Community Reinvestment gross revenues.
Act.
Department of Agriculture, Commodity SBA size standards........... 7 CFR 1485.11(oo)
Credit Corporation, Market Promotion
Program.
----------------------------------------------------------------------------------------------------------------
Note for Airport Concessionaire Size Standards
Following is a list of the maximum average annual gross receipts in
the preceding 3 years (in millions of dollars):
------------------------------------------------------------------------
Concession Amount
------------------------------------------------------------------------
Food and beverage............................................. 30.00
Book stores................................................... 30.00
Auto rental................................................... 40.00
Banks......................................................... \1\100.0
0
Hotels and motels............................................. 30.00
Insurance machines and counters............................... 30.00
Gift, novelty, and souvenir shop.............................. 30.00
Newsstands.................................................... 30.00
Shoe shine stands............................................. 30.00
Barber shops.................................................. 30.00
Automobile parking............................................ 30.00
Jewelry stores................................................ 30.00
Liquor stores................................................. 30.00
Travel agencies............................................... 30.00
Drug stores................................................... 30.00
Pastries and baked goods...................................... 30.00
Luggage cart rental........................................... 30.00
Coin-operated T.V.'s.......................................... 30.00
Game rooms.................................................... 30.00
Luggage and leather goods stores.............................. 30.00
Candy, nut, and confectionery stores.......................... 30.00
Toy stores.................................................... 30.00
Beauty shops.................................................. 30.00
Vending machines.............................................. 30.00
Coin-operated lockers......................................... 30.00
Florists...................................................... 30.00
Advertising................................................... 30.00
Taxicab....................................................... 30.00
Limousines.................................................... 30.00
Duty free shops............................................... 30.00
Pay telephones................................................ \2\ 1,50
0
Gambling machines............................................. 30.00
Other concessions not shown above............................. 30.00
------------------------------------------------------------------------
\1\ As measured by total assets.
\2\ Number of employees.
SBA will briefly describe and respond to the comments received in
response to its initial proposed rule regarding alternate size
standards of other agencies. Several of the commenters, although
supportive of the proposed rule, identified the following issues that
they felt warranted further clarification or modification to the
proposed procedures. These issues are identified below along with the
SBA's response.
Definition and Calculation of Average Annual Receipts and Number of
Employees: The commenters raised two questions concerning annual
average receipts and number of employees--how are these terms defined
and how are they calculated? As specified in revised Sec. 121.901, the
SBA utilizes its rules, standards and procedures when making size
determinations for other agencies. For clarification on the definition
and calculation of size standard measures, Sec. 121.902(b)(1)(ii)(D) of
this part has been added to incorporate, by reference, the SBA's
criteria for defining and calculating gross receipts and number of
employees. The SBA's policy of applying the criteria specified in this
regulation to another agency's size standard does not preclude a
department or agency from requesting a change to the definition of
procedures regarding its size standard. Such request would be part of
the SBA's review of the proposed size standard.
Size Standard Measures: Two commenters suggested that these
regulations should permit the use of size standard measures other than
gross receipts and number of employees, such as net worth, and permit
the use of number of employees for non-manufacturing industries. For
non-SBA size standards, the law clearly requires that the size standard
for manufacturing concerns be established based on number of employees,
and for concerns providing services that the size standards be
established based on gross receipts. SBA believes that the statutory
changes pursuant to Sec. 301 of Public Law 103-403 permit an agency to
request establishment of a size standard for all other types of
concerns (e.g., agriculture, construction, retail trade) based on gross
receipts, number of employees or another quantitative measure of size
suitable for the purpose and industry under consideration, and this
final rule allows a department or agency to make such a request.
Application of Size Standards to Programs: The comments reviewed
reflected confusion about the application of non-SBA size standards to
Federal government programs. Several commenters indicated that they
were unsure if non-SBA size standards were only to be used within a
specific department or agency, even though a program may be implemented
across several agencies or departments. Second, some commenters
appeared to be under the misunderstanding that individual agencies
would be able to establish their own size standards for use in SBA
programs within their agency.
These regulations allow departments and agencies to prescribe
unique size standards only for programs under their responsibility. For
example, this means that size standards established by the Department
of Transportation for a program under its control are applicable to all
departments or agencies that must also implement such a program.
Similarly, the SBA size standards are applicable to all programs under
the SBA area of cognizance, regardless of where implemented. This means
that the SBA size standards must be used by all departments and
agencies for the Small Business Set-Aside and MED Programs.
In another case, a statute may require the use of SBA's size
standards or refer to small business as defined under the Small
Business Act. An example is the Department of Defense's Small
Disadvantaged Business Program. In those cases, the SBA size standards
clearly must be used. However, if use of SBA's size standards has not
been statutorily required, a Federal department or agency is free to
either use the SBA's size standards or endeavor to obtain the approval
of SBA to establish a different size standard.
Size Determinations and Appeals to Non-SBA Size Standards: A
commenter raised the question of how size determinations and appeals
would be made for non-SBA size standards in cases involving a dispute
over the size status of a business concern. When requested, the SBA
will provide size determinations for other Federal government agencies,
even in cases where size standards are established by statute or the
SBA has approved size standards different from its own size standards
(See proposed Sec. 121.1001(b)(6)). The SBA also provides a
discretionary appeal process from such size determinations that would
be available to other Federal agencies. The procedures regarding size
appeals are contained in part 134 (See proposed Sec. 121.1102).
Documentation for SBA Review of Non-SBA Size Standards: A commenter
requested clarification on what
[[Page 57992]]
documentation must accompany its requests for approval of non-SBA size
standards, particularly regarding submission of copies of comments
received on the proposed rule. In order for the SBA to properly
evaluate requests to issue proposed rules, an agency proposing a size
standard shall provide the SBA with (1) the reasons for proposing a
size standard different from the SBA's size standard, and (2) industry
related data or other data supporting its proposed size standard. In
order to properly evaluate each request for non-SBA size standards and
approve the issuance of a final rule, the SBA shall also be provided
with copies of all comments that relate to the establishment of the
size standard, not just copies of all comments received on the proposed
rule. The SBA has modified a provision of the proposed rule to specify
that only comments related to the size standard need to be provided to
the SBA as part of its review of an agency final rule.
Another commenter recommended modifying the requirement to provide
the SBA with a copy of the final rule prior to approval by the SBA's
Administrator. To expedite the SBA's review of the size standard at
this stage of the rulemaking process, the commenter recommended that
agencies be allowed to submit the intended size standard with an
accompanying justification. The SBA agrees, and has modified this
provision of the proposed rule. When possible, the requesting agency
should submit a draft final rule and preamble. However, correspondence
containing a justification for the intended size standard is
acceptable, provided the agency furnishes the SBA a copy of the final
rule and its preamble before submitting it for publication in the
Federal Register.
Clarify ``Other Factors'' Considered by the SBA Administrator:
Several commenters requested clarification on the information the SBA
believes it should review when complying with the requirement to
``consider other factors the Administrator deems to be relevant.'' When
establishing or approving size standards, the SBA Administrator is
required to ensure that size standards vary by industry to the extent
necessary to reflect industry differences and to consider other
relevant factors. The SBA generally evaluates the structural
characteristics of an industry to determine the appropriate differences
between industry size standards. These characteristics include, but are
not limited to: average firm size, industry competition, the extent of
industry dominance by large firms, the distribution of sales and
employees by firm size, and start-up costs. Other relevant factors
generally pertain to all other types of information that could
influence the decision on the size standard. Although this may vary for
each request, several important factors would include the goals and
objectives of the program, the impact of the size standard on small
businesses, conventional industry business practices, and the
administration and application of size standard requirements.
Timeliness of SBA Decisions on Approval Process: Several commenters
were concerned about the timeliness of the SBA approval process and
what impact it might have on rulemaking. The SBA shares this concern
and will make every effort to ensure that the regulatory process is not
delayed. However, the SBA believes specifying a time frame for these
reviews is impractical. Each request will likely have different
implications. That makes estimating within this rule a definite
completion date for a review inappropriate. The SBA will, as a matter
of policy, respond to requests for non-SBA size standards within 30
days. Where the SBA cannot respond within 30 days, the agency will
advise the requester as soon as possible.
SBA Reviews and Legislation Providing Authority to Establish Size
Standard: One comment questioned the need for an agency to request the
SBA's approval for a non-SBA size standard if the enabling legislation
for a particular program specifically authorized the agency to
establish a size standard without specifying a size standard.
The SBA believes that if the enabling legislation does not
designate the size standard, the department or agency would be required
to follow the approval procedures specified in the Small Business Act
and these regulations. Only in instances in which legislation
specifically establishes a size standard would an agency or department
be exempted from these procedures.
Section 121.1504 would be redesignated as Sec. 121.903, and
reworded in plain English.
Section 121.1601 would be redesignated as Sec. 121.1001 and
reworded for clarity. The section would be revised to reflect the new
names of offices under SBA's reorganization. References to the Agency's
regional offices would be changed to the offices of SBA Government
Contracting Area Director or SBA District Director, as appropriate.
Reference to any inactive assistance program would be deleted. In
addition, proposed Sec. 121.1001(b)(1)(iv) would be amended by
expanding the first sentence to clarify existing policy. The
regulations currently state that a large business may initiate a size
protest as an interested party if only one offer was received. This
change would clarify that this does not include a concern that is found
to be other than small for a particular procurement protesting the size
of the only remaining offeror.
Proposed Sec. 121.1001(b)(5) (present Sec. 121.1601(a)(5)) would be
amended to clarify that SBA will make size determinations when a
procurement is unrestricted, and that the Office of Hearings and
Appeals (OHA) will issue decisions on size appeals and Standard
Industrial Classification (SIC) code appeals on unrestricted
procurements. This change is necessary because OHA has issued decisions
in the past that the SBA regional offices have no jurisdiction to make
size determinations when a procurement is unrestricted, and that OHA
has no jurisdiction over size appeals or SIC Code appeals when a
procurement is unrestricted. SBA disagrees with OHA's interpretation of
the existing regulations, and therefore proposes to clarify the
regulations. OHA has said that small business status is beneficial only
for small business set-aside contracts. This is not true. Small
business status is beneficial in unrestricted procurements as well for
the following reasons, among others:
1. Small Businesses receive the contract award in the case of a tie
bid with a large business.
2. Small businesses are eligible to apply for a Certificate of
Competency when a contracting officer makes a determination of non-
responsibility.
3. Small businesses are exempt from the Cost Accounting Standards.
4. Small businesses may receive accelerated progress payments.
5. Small businesses are exempt from submitting subcontracting
plans.
In the January 1, 1990, revision to 13 CFR Part 121, SBA attempted to
clarify this issue by providing the example of the tie bids and the
Certificate of Competency eligibility. It was not SBA's intention to
limit size determinations and size appeals to just those two examples
when a procurement is unrestricted. However, after publication of the
revised regulations, OHA ruled that it would not make a decision on a
size determination appeal unless there were tie bids or the contracting
officer made a determination of non-responsibility. There are many
benefits to being a small business in unrestricted procurements. It is
SBA's policy to make size determinations when a
[[Page 57993]]
protest is received on any unrestricted procurement, regardless of
whether there is an apparent benefit at the time the protest is
received. Additionally, SBA is attempting to clarify that OHA has
jurisdiction to issue decisions concerning SIC appeals on unrestricted
procurements. Currently, a concern has no recourse when a contracting
officer issues an unrestricted solicitation with an incorrect SIC Code.
The revised Sec. 121.1001 would be further amended to use the term
``headquarters'' in lieu of the term ``principal office'' in referring
to a concern's primary headquarters. SBA believes the term
``headquarters'' more accurately describes the location where a firm's
business or corporate records are maintained and business decisions are
made.
Section 121.1602 would be redesignated as Sec. 121.1002, rewritten
for clarity, and amended to provide for changes in offices responsible
for making formal size determinations as a result of the Agency's
reorganization. The Government Contracting Area Director would assume
the responsibilities formerly held by SBA regional administrators for
making size determinations. The term ``headquarters'' would be used
instead of ``principal offices'' when describing the primary location
of a concern's executive office.
Section 121.1603 would be broken out into proposed Secs. 121.1003
through 121.1006 for ease of use and clarity. Individual sections would
be created relating to where a protest should be filed, what time
limits apply to size protests, how a protest must be filed with the
contracting officer, and referral of a size protest to the appropriate
SBA Government Contracting Area Office.
Proposed Sec. 121.1004 would clarify that although a protest filed
by a contracting officer is timely whether filed before or after award,
such a protest will be dismissed by SBA as premature if filed before
the selection of the apparent successful offeror. This change would
prohibit a contracting officer from protesting the size of several
concerns at once (e.g., all firms found to be in the competitive range)
and would authorize a protest only after the apparent successful
offeror has been selected.
Section 121.1604(a) and (b) would be redesignated as
Sec. 121.1007(b) and (c), reworded for clarity, and the examples
deleted. A portion of present Sec. 121.1601(a)(1)(iv) would be added to
proposed Sec. 121.1007 as subsection (a) for the purpose of clarifying
that a protest not pertaining to a particular procurement or sale would
not be acted upon by SBA. Subsection (c) which pertains to appeals of
dismissals would be eliminated as unnecessary in this section
addressing size determinations.
Section 121.1605 would be redesignated as Sec. 121.1008 and would
be reworded for clarity and user ease. In addition, the revised
Sec. 121.1008(a) would be amended to allow any overnight mail delivery
service that provides proof of receipt to be used in the size
determination process. This change is necessary in order that size
determinations may be made in a timely manner.
Section 121.1606 would be redesignated as Sec. 121.1009. Its
provisions would be reworded for clarity. The revision would permit use
of any overnight mail delivery service that provides proof of receipt
to be used in the size determination process. The change would assist
SBA in making size determinations in a timely manner. Paragraph (g)(3)
would be further amended to provide that a concern which had self
certified as small on a pending procurement or assistance application
would have to provide notice of any adverse size determination to
officials responsible for the pending procurement or assistance
request. Subsection (h) would be added to permit the SBA office that
performed a formal size determination to reopen that determination in
the limited instance where the size determination contains clear
administrative error or a clear mistake of fact, provided that no
appeal has been taken to OHA and that no contract has been awarded.
This provision would permit SBA to correct the error or mistake without
requiring the filing of an appeal at OHA.
Section 121.1607 would be redesignated as Sec. 121.1010. The
proposed provision would be reworded for ease of use and clarity.
Section 121.1701 would be amended and the substance of subsections
(a) and (b) redesignated as Sec. 121.1101 and Sec. 121.1103,
respectively. Proposed Sec. 121.1101 would materially alter the right
of a party adversely affected by a size determination to appeal the
adverse determination to OHA and further provide that OHA has the
unfettered discretion to select and review formal size determinations.
There would no longer be a right to appeal a size determination. SBA
believes that this amended procedure will simplify and speed the final
consideration of size status issues. Unless a petition for review is
accepted by OHA, the size determinations made by Government Contracting
offices and disaster area offices would be final Agency decisions and
would end the size determination process. Under the revised procedures,
the procurement process generally would not be delayed because of size
determination appeals to OHA. OHA could elect to consider any size
determination appeal request.
Section 121.1702 has been eliminated. Part of proposed
Sec. 121.1101 simply references procedures for discretionary OHA
reviews as contained in part 134.
Section 121.1703(a) would be incorporated into Sec. 121.1101.
Sections 121.1703 (b) and (c) would be incorporated into
Secs. 121.1103, and 121.1703(d) would be eliminated.
Section 121.1704 would be incorporated into Sec. 121.1103. The
revised section would address procedures for appealing SIC code
designations. The revision would provide that appeal procedures would
be those outlined in FAR 19-303.
Sections 121.1705 through 121.1722 would be eliminated and their
substance transferred to part 134.
Sections 121.2001 through 121.2005 would be redesignated as
Secs. 121.1201 through 121.1206. The sections would be revised to
reflect better clarity and organizational content. The substance of
these provisions would remain substantially unaffected. Minor editorial
changes would be made, for example, to eliminate outdated information
such as procurement funding levels for prior years. The content of the
current Sec. 121.2004 would be rearranged in a more logical sequence.
Where organizational titles have changed, the revisions would adopt the
new titles.
Sections 121.2101 through 121.2104 would be redesignated as
Secs. 121.1301-121.1304, respectively, Sec. 121.2105 would be
incorporated into proposed Sec. 121.1304, and Sec. 121.2106 would be
redesignated as Sec. 121.1305. Minor editorial changes pertaining to
class waivers would be made for ease of reading and use.
In addition, SBA is proposing to incorporate in these sections
procedural rules pertaining to individual waivers of the
Nonmanufacturer Rule for specific solicitations. On November 15, 1988,
the enactment of Public Law 100-656 incorporated into the Small
Business Act the previously existing SBA requirement that recipients of
small business set-asides or SBA 8(a) subcontracts for manufactured
products that are not the actual manufacturers (nonmanufacturers) be
themselves small business regular dealers. This legislation specifies
that regular dealers may provide only the product of domestic small
business manufacturers or processors on small business set-asides and
8(a) procurements. This requirement is commonly known as the
[[Page 57994]]
Nonmanufacturer Rule. Section 303(h) of Public Law 100-656 authorized
the Administrator of the SBA to grant a waiver of the Nonmanufacturer
Rule for a product or class of products for which there are no small
business manufacturers or processors in the Federal market. The
requirement that a small business supplier provide a product
manufactured or processed by a small business concern in the U.S. under
a contract set-aside for small business or under an SBA 8(a)
subcontract is found in SBA regulations at Secs. 121.406(b). On June
15, 1989, Public Law 101-37 renumbered the elements in the
Nonmanufacturer Rule and added the requirement that a small business
concern must meet the numerical size standard for the Standard
Industrial Classification code assigned to the contract solicitation on
which the offer is being made. Further, on November 15, 1990, Public
Law 101-574 modified the wording of the waiver provision. The new
wording allowed the Administrator of the SBA to waive the requirement
for any product or class of products for which there is no small
business manufacturer or processor ``available to participate in the
Federal procurement market.'' The law also added a provision which
allows the Administrator to waive the requirements of the
Nonmanufacturer Rule after receiving a determination by the contracting
officer stating that no small business manufacturer or processor can
reasonably be expected to offer a product meeting the specification,
including period of performance, required of an offeror on a
solicitation.
On September 21, 1993, SBA published in the Federal Register
proposed procedural rules for individual waivers of the Nonmanufacturer
Rule. SBA received two sets of comments in response to the proposed
rule. Due to the passage of time since the proposed rule was originally
published, SBA is not issuing final regulations pertaining to
individual waivers but is again proposing revised regulations taking
into account the comments received. The first commenter was the United
States Department of the Interior, Geological Survey (DOI). Its first
comment was a request to include in the regulations a definition of
``nonmanufacturing.'' Since this term is not used in the proposed
regulations, a definition is unnecessary.
DOI's second comment was a request to clarify the language of the
regulation by shortening word and sentence lengths. SBA reviewed the
regulation and, where possible, reduced the length of the sentences and
the size of the words.
The second commenter was a small business wholesaler who submitted
four comments. The first comment was that SBA should review and grant
class waivers for individual items. The statute authorizing waivers
does permit class waivers for products for which there are no small
business manufacturers available to participate in the Federal
procurement market and current SBA regulations already address this.
Consequently, no action on the comment is necessary.
The small business wholesaler's second comment was that a SBA
Business Opportunity Specialist should be allowed to request waivers
for individual procurements. Waivers for individual procurements are
routinely granted for both small business set-asides and SBA 8(a)
subcontracts. SBA believes that the best procedure to maintain
administrative consistency is to allow only the procuring agencies'
contracting officers to request individual waivers for both set-asides
and 8(a) awards. We believe that the procuring agency contracting
officer ultimately responsible for contract award is the most qualified
individual to determine whether small business products are available
and/or meet the specifications of a particular solicitation.
The small business wholesaler's third comment was that SBA state
procurement center representatives should be allowed to request
individual waivers of the Nonmanufacturer Rule. Public Law 101-574,
Section 210, is explicit in its language allowing only contracting
officers to request individual waivers. Therefore, SBA has no authority
to allow anyone other than contracting officers to request individual
waivers of the Nonmanufacturer Rule.
The fourth comment by the small business wholesaler was that SBA
8(a) subcontractors should be allowed to request individual waivers of
the Nonmanufacturer Rule. As with the commenter's third comment, Public
Law 101-574, Section 210, is explicit in its language allowing only
contracting officers to request individual waivers.
Compliance With Executive Orders 12612, 12778, and 12866, the
Regulatory Flexibility Act (5 U.S.C. 601, et seq.), and the Paperwork
Reduction Act (44 U.S.C. Ch. 35)
SBA certifies that this proposed rule would not be considered a
significant rule within the meaning of Executive Order 12866 and would
not have a significant economic impact on a substantial number of small
entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C.
601, et seq. This rule is would clarify SBA's procedural and
definitional size rules, but would not change the size standard for any
particular industry. As such, size eligibility for the various SBA
programs should not be affected by this proposal. The rule would have
no effect on the amount or dollar value of any Federal contract
requirements or of any financial assistance provided through SBA.
Therefore, it is not likely to have an annual economic effect of $100
million or more, result in a major increase in costs or prices, or have
a significant adverse effect on competition or the United States
economy.
For purposes of the Paperwork Reduction Act, 44 U.S.C. Ch. 35, SBA
certifies that this proposed rule, if adopted in final form, would
contain no new reporting or recordkeeping requirements.
For purposes of Executive Order 12612, SBA certifies that this rule
would not have any federalism implications warranting the preparation
of a Federalism Assessment.
For purposes of Executive Order 12778, SBA certifies that this rule
is drafted, to the extent practicable, in accordance with the standards
set forth in Section 2 of that Order.
List of Subjects in 13 CFR Part 121
Government procurement, Government property, Grant programs--
business, Individuals with disabilities, Loan programs--business,
Reporting and recordkeeping requirements, Small businesses.
Accordingly, pursuant to the authority set forth in sections 3(a)
and 5(b)(6) of the Small Business Act, 15 U.S.C. 632(a) and 634(b)(6),
SBA hereby proposes to revise part 121 of Title 13, Code of Federal
Regulations (CFR), to read as follows:
PART 121--SMALL BUSINESS SIZE REGULATIONS
Subpart A--Size Eligibility Provisions and Standards
Provisions of General Applicability
Sec.
121.101 What are SBA size standards?
121.102 How does SBA establish size standards?
121.103 What is affiliation?
121.104 How does SBA calculate annual receipts?
121.105 How does SBA define ``business concern or concern''?
121.106 How does SBA calculate number of employees?
121.107 How does SBA determine a concern's ``primary industry''?
[[Page 57995]]
121.108 What are the penalties for misrepresentation of size
status?
Size Standards Used To Define Small Business Concerns
6121.201 What size standards has SBA identified by Standard Industrial
Classification codes?
Size Eligibility Requirements for SBA Financial Assistance
6121.301 What size standards are applicable to financial assistance
programs?
6121.302 When does SBA determine the size status of an applicant?
6121.303 What size procedures are used by SBA before it makes a formal
size determination?
6121.304 What are the size requirements for refinancing an existing
SBA loan?
6121.305 What size eligibility requirements exist for obtaining
business loans relating to particular procurements?
Size Eligibility Requirements for Government Procurement
6121.401 What procurement programs are subject to size determinations?
6121.402 What size standards are applicable to procurement assistance
programs?
6121.403 Are SBA size determinations and SIC code designations binding
on parties?
6121.404 When does SBA determine the size status of a business
concern?
6121.405 May a business concern self-certify its small business size
status?
6121.406 How does a small business concern qualify to provide
manufactured products under small business set-aside or MED
procurements?
6121.407 What are the size procedures for multiple item procurements?
6121.408 What are the size procedures for SBA's Certificate of
Competency Program?
6121.409 What size standard applies in an unrestricted procurement for
Certificate of Competency purposes?
6121.410 What are the size standards for SBA's Section 8(d)
Subcontracting Program?
6121.411 What are the size procedures for SBA's Section 8(d)
Subcontracting Program?
6121.412 What are the size procedures for partial small business set-
asides?
Size Eligibility Requirements for Sales or Lease Of Government Property
6121.501 What programs for sales or leases of Government property are
subject to size determinations?
6121.502 What size standards are applicable to programs for sales or
leases of Government property?
6121.503 Are SBA size determinations binding on parties?
6121.504 When does SBA determine the size status of a business
concern?
6121.505 What is the effect of a self-certification?
6121.506 What definitions are important for sales or leases of
Government-owned timber?
6121.507 What are the size standards and other requirements for the
purchase of Government-owned timber (other than Special Salvage
timber)?
6121.508 What are the size standards and other requirements for the
purchase of Government-owned Special Salvage Timber?
6121.509 What is the size standard for leasing of Government land for
coal mining?
6121.510 What is the size standard for leasing of Government land for
uranium mining?
6121.511 What is the size standard for buying Government-owned
petroleum?
6121.512 What is the size standard for stockpile purchases?
Size Eligibility Requirements for the Minority Enterprise Development
(MED) Program
6121.601 What is a small business for purposes of admission to SBA's
Minority Enterprise Development (MED) Program?
6121.602 At what point in time must a MED applicant be small?
6121.603 How does SBA determine whether a Participant is small for a
particular MED subcontract?
6121.604 Are MED Participants considered small for purposes of other
SBA assistance?
Size Eligibility Requirements for the Small Business Innovation
Research (SBIR) Program
6121.701 What SBIR programs are subject to size determinations?
6121.702 What size standards are applicable to SBIR programs?
6121.703 Are formal size determinations binding on parties?
6121.704 When does SBA determine the size status of a business
concern?
6121.705 Must a business concern self-certify its size status?
Size Eligibility Requirements for Paying Reduced Patent Fees
6121.801 May patent fees be reduced if a concern is small?
6121.802 What size standards are applicable to reduced patent fees
program?
121.803 Are formal size determinations binding on parties?
121.804 When does SBA determine the size status of a business
concern?
121.805 May a business concern self-certify its size status?
Size Eligibility Requirements for Compliance With Programs of Other
Agencies
121.901 Can other Government agencies obtain SBA size
determinations?
121.902 What size standards are applicable to programs of other
agencies?
121.903 When does SBA determine the size status of a business
concern?
Procedures for Size Protests and Requests for Formal Size
Determinations
121.1001 Who may initiate a size protest or a request for formal
size determination?
121.1002 Who makes a formal size determination?
121.1003 Where should a size protest be filed?
121.1004 What time limits apply to size protests?
121.1005 How must a protest be filed with the contracting officer?
121.1006 When will a size protest be referred to an SBA Government
Contracting Area Office?
121.1007 Must a protest of size status relate to a particular
procurement and be specific?
121.1008 What happens after SBA receives a protest or a request for
a formal size determination?
121.1009 What are the procedures for making the size determination?
121.1010 How does a concern become recertified as a small business?
Appeals of Size Determinations and SIC Code Designations
121.1101 Are formal size determinations subject to appeal?
121.1102 Are SIC code designations subject to appeal?
121.1103 What are the procedures for appealing a SIC code
designation?
121.1104 What are the time limits for appeals?
Subpart B--Other Eligibility Provisions
Eligibility of Organizations for the Handicapped for Small Business
Set-asides
121.1201 May handicapped organizations be awarded Federal
procurements set aside for small business?
121.1202 What is an organization for the handicapped?
121.1203 Who are handicapped individuals?
121.1204 What are the eligibility requirements for organizations
for the handicapped to receive awards of contracts set aside for
small business?
121.1205 What are the procedures for filing protests of the status
of handicapped organizations?
121.1206 How does SBA handle appeals of economic impact?
Waivers of the Nonmanufacturer Rule for Classes of Products
121.1301 What is the Nonmanufacturer Rule?
121.1302 When will a waiver of the Nonmanufacturer Rule be granted
for a class of products?
121.1303 When will a waiver of the Nonmanufacturer Rule be granted
for an individual contract?
[[Page 57996]]
121.1304 What are the procedures for requesting and granting
waivers?
121.1305 How is a list of previously granted class waivers
obtained?
Authority: 15 U.S.C. 632(a), 634(b)(6), 637(a) and 644(c); and
Pub. L. 102-486, 106 Stat. 2776, 3133.
Provisions of General Applicability
Sec. 121.101 What are SBA size standards?
SBA's size standards define whether a business entity is small and,
thus, eligible for Government programs and preferences reserved for
``small business'' concerns. Size standards have been established for
types of economic activity, or industry, generally under the Standard
Industrial Classification (SIC) System. The SIC System is described in
the ``Standard Industrial Classification Manual'' published by the
Office of Management and Budget, Executive Office of the President, and
sold by the U.S. Government Printing Office, Superintendent of
Documents, P.O. Box 371954, Pittsburgh, PA 15250-7954. The SIC System
assigns four-digit SIC codes to all economic activity within ten major
divisions. Section 121.201 describes the size standards now
established. A full table matching a size standard with each four-digit
SIC code is also published annually by SBA in the Federal Register.
Sec. 121.102 How does SBA establish size standards?
(a) SBA considers economic characteristics comprising the structure
of an industry, including degree of competition, average firm size,
start-up costs and entry barriers, and distribution of firms by size.
It also considers technological changes, competition from other
industries, growth trends, historical activity within an industry,
unique factors occurring in the industry which may distinguish small
firms from other firms, and the objectives of its programs and the
impact on those programs of different size standard levels.
(b) As part of its review of a size standard, SBA will investigate
if any concern at or below a particular standard would be dominant in
the industry. SBA will take into consideration market share of a
concern and other appropriate factors which may allow a concern to
exercise a major controlling influence on a national basis in which a
number of business concerns are engaged. Size standards seek to ensure
that a concern that meets a specific size standard is not dominant in
its field of operation.
(c) Please address any requests to change existing size standards
or establish new ones for emerging industries to the Assistant
Administrator for Size Standards, Small Business Administration, 409
3rd Street, S.W., Washington, D.C. 20416.
Sec. 121.103 What is affiliation?
(a) General Principles of Affiliation. (1) Concerns are affiliates
of each other when one concern controls or has the power to control the
other, or a third party or parties controls or has the power to control
both.
(2) SBA considers factors such as ownership, management, and
contractual relationships, in determining whether affiliation exists.
(3) Individuals or firms that have identical or substantially
identical business or economic interests, such as family members,
persons with common investments, or firms that are economically
dependent through contractual or other relationships, may be treated as
one party with such interests aggregated.
(4) SBA counts the receipts or employees of the concern whose size
is at issue and those of all its domestic and foreign affiliates,
regardless of whether the affiliates are organized for profit, in
determining the concern's size.
(b) Exclusion from affiliation coverage. (1) Business concerns
owned in whole or substantial part by investment companies licensed, or
development companies qualifying, under the Small Business Investment
Act of 1958, as amended, or by Investment Companies registered under
the Investment Company Act of 1940, as amended, are not considered
affiliates of such investment companies or development companies.
(2) Business concerns owned and controlled by Indian Tribes, Alaska
Regional or Village Corporations organized pursuant to the Alaska
Native Claims Settlement Act (43 U.S.C. 1601), Native Hawaiian
Organizations, or Community Development Corporations authorized by 42
U.S.C. 9805 are not considered affiliates of such entities, or with
other concerns owned by these entities solely because of their common
ownership.
(3) Business concerns which are part of a SBA approved pool of
concerns for a joint program of research and development as authorized
by the Small Business Act are not affiliates of one another because of
the pool.
(4) Business concerns which lease employees from concerns primarily
engaged in leasing employees to other businesses are not affiliated
with the leasing company solely on the basis of a leasing agreement.
(5) For financial, management, or technical assistance under the
Small Business Investment Company program, an applicant concern will
not be affiliated with the following investors, provided the investors
do not control the concern other than to the extent that would be
permitted under Sec. 107.865 of this chapter:
(i) Venture capital operating companies as defined in the U.S.
Department of Labor Regulations found at 29 CFR 2510.3-101(d);
(ii) Employee benefit or pension plans established and maintained
by the Federal government or by any state, their political
subdivisions, or any agency or instrumentality thereof for the benefit
of employees;
(iii) Employee benefit or pension plans within the meaning of the
Employee Retirement Income Security Act of 1974; or
(iv) Charitable trusts, foundations, endowments, or similar
organizations exempt from Federal income taxation under Section 501(c)
of the Internal Revenue Code of 1986.
(6) A protege firm is not an affiliate of a mentor firm solely
because the protege firm receives assistance from the mentor firm under
Federal Mentor-Protege programs.
(c) Affiliation based on stock ownership. (1) A person is an
affiliate of a concern if the person owns or controls, or has the power
to control 50 percent or more of its voting stock, or a block of stock
which affords control because it is large compared to other outstanding
blocks of stock.
(2) If two or more persons each owns, controls or has the power to
control less than 50 percent of the voting stock of a concern, with
minority holdings that are equal or approximately equal in size, but
the aggregate of these minority holdings is large as compared with any
other stock holding, each such person is presumed to be an affiliate of
the concern.
(d) Affiliation arising under stock options, convertible
debentures, and agreements to merge. Since stock options, convertible
debentures, and agreements to merge (including agreements in principle)
affect the power to control a concern, SBA treats them as though the
rights granted have been exercised (except that an affiliate cannot use
them to appear to terminate control over another concern before it
actually does so). SBA gives present effect to an agreement to merge or
sell stock whether such agreement is unconditional, conditional, or
finalized but unexecuted. Agreements to open or continue negotiations
towards the possibility of a merger or a sale of stock at some later
date are not considered
[[Page 57997]]
``agreements in principle'' and, thus, are not given present effect.
(e) Affiliation based on common management. Affiliation arises
where one or more officers, directors or general partners controls the
board of directors and/or the management of another concern.
(f) Affiliation based on joint venture arrangements. (1) Parties to
a joint venture are affiliates if any one of them seeks SBA financial
assistance for use in connection with the joint venture.
(2) Concerns bidding on a particular procurement or property sale
as joint venturers are affiliated with each other with regard to
performance of that contract.
(3) A contractor and subcontractor are treated as joint venturers
if the ostensible subcontractor will perform primary and vital
requirements of a contract or if the prime contractor is unusually
reliant upon the ostensible subcontractor. All requirements of the
contract are considered in reviewing such relationship, including
contract management, technical responsibilities, and the percentage of
subcontracted work.
(4) For size purposes, a concern must include in its revenues its
proportionate share of joint venture receipts.
(g) Affiliation based on franchise and license agreements. The
restraints imposed on a franchisee or licensee by its franchise or
license agreement relating to standardized quality, advertising,
accounting format and other similar provisions, generally will not be
considered in determining whether the franchisor or licensor is
affiliated with the franchisee or licensee provided the latter has the
right to profit from its efforts and bears the risk of loss
commensurate with ownership. Affiliation may arise, however, through
other means, such as common ownership, common management or excessive
restrictions upon the sale of the franchise interest.
Sec. 121.104 How does SBA calculate annual receipts?
(a) Definitions. In determining annual receipts of a concern:
(1) Receipts is defined as gross or total income, plus cost of
goods sold, as reported on a concern's Federal Income Tax return.
However, the term receipts excludes net capital gains or losses, taxes
collected for and remitted to a taxing authority if included in gross
or total income, proceeds from the transactions between a concern and
its domestic or foreign affiliates (if also excluded from gross or
total income on a consolidated return filed with the IRS), and amounts
collected for another by a travel agent, real estate agent, advertising
agent, or conference management service provider.
(2) Completed fiscal year means a taxable year including any short
period. Taxable year and short period have the meaning attributed to
them by the IRS.
(3) Unless otherwise defined in this section, all terms shall have
the meaning attributed to them by the IRS.
(b) Period of measurement. (1) Annual receipts of a concern which
has been in business for 3 or more completed fiscal years means the
receipts of the concern over its last 3 completed fiscal years divided
by three.
(2) Annual receipts of a concern which has been in business for
less than 3 complete fiscal years means the receipts for the period the
concern has been in business divided by the number of weeks in
business, multiplied by 52.
(3) Annual receipts of a concern which has been in business 3 or
more complete fiscal years but has a short year as one of those years
means the receipts for the short year and the two full fiscal years
divided by the number of weeks in the short year and the two full
fiscal years, multiplied by 52.
(c) Use of information other than the Federal tax return. Where
other information gives SBA reason to regard Federal Income Tax returns
as false, SBA may base its size determination on such other
information.
(d) Annual receipts of affiliates. (1) If a concern has acquired an
affiliate or been acquired as an affiliate during the applicable
averaging period or before small business self-certification, the
annual receipts in determining size status include the receipts of both
firms. Furthermore, this aggregation applies for the entire applicable
period used in computing size rather than only for the period after the
affiliation arose. Receipts are determined for the concern and its
affiliates in accordance with paragraph (b) of this section even though
this may result in different periods being used to calculate annual
receipts.
(2) The annual receipts of a former affiliate are not included as
annual receipts if affiliation ceased before the date used for
determining size. This exclusion of annual receipts of a former
affiliate applies during the entire period used in computing size,
rather than only for the period after which the affiliation ceased.
Sec. 121.105 How does SBA define ``business concern or concern''?
(a) A business concern eligible for assistance from SBA as a small
business is a business entity organized for profit, with a place of
business located in the United States, and which operates primarily
within the United States or which makes a significant contribution to
the U.S. economy through payment of taxes or use of American products,
materials or labor.
(b) A business concern may be in the legal form of an individual
proprietorship, partnership, limited liability company, corporation,
joint venture, association, trust or cooperative, except that where the
form is a joint venture there can be no more than 49 percent
participation by foreign business entities in the joint venture.
(c) A firm will not be treated as a separate business concern if a
substantial portion of its assets and/or liabilities are the same as
those of a predecessor entity. In such a case, the annual receipts and
employees of the predecessor will be taken into account in determining
size.
Sec. 121.106 How does SBA calculate number of employees?
(a) Employees counted in determining size include all individuals
employed on a full-time, part-time, temporary, or other basis. SBA will
consider the totality of the circumstances, including factors relevant
for tax purposes, in determining whether individuals are employees of
the concern in question.
(b) Where the size standard is number of employees, the method for
determining a concern's size includes the following principles:
(1) The average number of employees of the concern is used
(including the employees of its domestic and foreign affiliates) based
upon numbers of employees for each of the pay periods for the preceding
completed 12 calendar months.
(2) Part-time and temporary employees are counted the same as full-
time employees.
(3) If a concern has not been in business for 12 months, the
average number of employees is used for each of the pay periods during
which it has been in business.
(4) The treatment of employees of former affiliates or recently
acquired affiliates is the same as for size determinations using annual
receipts in Sec. 121.104(d).
Sec. 121.107 How does SBA determine a concern's ``primary industry''?
In determining the primary industry in which a concern or a concern
combined with its affiliates is engaged, SBA considers the distribution
of receipts, employees and costs of doing business among the different
industries in which business operations occurred for the most recently
completed fiscal
[[Page 57998]]
year. SBA may also consider other factors, such as the distribution of
patents, contract awards, and assets.
Sec. 121.108 What are the penalties for misrepresentation of size
status?
In addition to other laws which may be applicable, section 16(d) of
the Small Business Act, 15 U.S.C. 645(d), provides severe criminal
penalties for knowingly misrepresenting the small business size status
of a concern in connection with procurement programs. Section 16(a) of
the Act also provides, in part, for criminal penalties for knowingly
making false statements or misrepresentations to SBA for the purpose of
influencing in any way the actions of the Agency.
Size Standards Used to Define Small Business Concerns
Sec. 121.201 What size standards has SBA identified by Standard
Industrial Classification codes?
The size standards described in this section apply to all SBA
programs unless otherwise specified. The number of employees or annual
receipts indicates the maximum allowed for a concern and its affiliates
to be considered small. The following is a listing of size standards
for industries under the SIC System. Size standards are listed by
Division and apply to all industries in that Division except those
specifically listed with separate size standards.
Size Standards by SIC Industry
------------------------------------------------------------------------
Size standards in
SIC code and description number of employees or
millions of dollars
------------------------------------------------------------------------
DIVISION A--AGRICULTURE
------------------------------------------------------------------------
MAJOR GROUP 01--AGRICULTURAL PRODUCTION-CROPS.. 0.5
MAJOR GROUPS 02--LIVESTOCK AND ANIMAL 0.5
SPECIALTIES.
EXCEPT:
0211 Beef Cattle Feedlots (Custom)........ 1.5
0252 Chicken Eggs......................... 9.0
MAJOR GROUP 07--AGRICULTURAL SERVICES.......... 5.0
MAJOR GROUP 08--FORESTRY....................... 5.0
MAJOR GROUP 09--FISHING, HUNTING, AND TRAPPING. 3.0
DIVISION B--MINING
------------------------------------------------------------------------
MAJOR GROUP 10--METAL MINING................... 500
MAJOR GROUP 12--COAL MINING.................... 500
MAJOR GROUP 13--OIL AND GAS EXTRACTION AND 500
MAJOR GROUP 14--MINING AND QUARRYING OF
NONMETALLIC MINERALS, EXCEPT FUELS.
EXCEPT:
1081 Metal Mining Services................ 5.0
1241 Coal Mining Services................. 5.0
1382 Oil and Gas Field Exploration 5.0
Services.
1389 Oil and Gas Field Services, N.E.C.... 5.0
DIVISION C--CONSTRUCTION
------------------------------------------------------------------------
MAJOR GROUP 15--GENERAL BUILDING CONTRACTORS... 17.0
MAJOR GROUP 16--HEAVY CONSTRUCTION, NON 17.0
BUILDING.
EXCEPT:
1629 (Part) Dredging and Surface Cleanup 13.5 \1\
Activities.
MAJOR GROUP 17--CONSTRUCTION--SPECIAL TRADE 7.0
CONTRACTORS.
DIVISION D--MANUFACTURING \2\.................. 500
EXCEPT:
2032 Canned Specialties................... 1,000
2033 Canned Fruits, Vegetables, Preserves, 500 \3\
Jams and Jellies.
2043 Cereal Breakfast Foods............... 1,000
2046 Wet Corn Milling..................... 750
2052 Cookies and Crackers................. 750
2062 Cane Sugar Refining.................. 750
2063 Beet Sugar........................... 750
2076 Vegetable Oil Mills, Except Corn, 1,000
Cottonseed, and Soybean.
2079 Shortening, Table Oils, Margarine, 750
and Other Edible Fats and Oils, N.E.C.
2085 Distilled and Blended Liquors........ 750
2111 Cigarettes........................... 1,000
2211 Broadwoven Fabric Mills, Cotton...... 1,000
2261 Finishers of Broadwoven Fabrics of 1,000
Cotton.
2295 Coated Fabrics, Not Rubberized....... 1,000
2296 Tire Cord and Fabrics................ 1,000
2611 Pulp Mills........................... 750
2621 Paper Mills.......................... 750
2631 Paperboard Mills..................... 750
2656 Sanitary Food Containers, Except 750
Folding.
2657 Folding Paperboard Boxes, Including 750
Sanitary.
[[Page 57999]]
2812 Alkalies and Chlorine................ 1,000
2813 Industrial Gases..................... 1,000
2816 Inorganic Pigments................... 1,000
2819 Industrial Inorganic Chemicals, N.E.C 1,000
2821 Plastics Materials, Synthetic Resins, 750
and Nonvulcanizable Elastomers.
2822 Synthetic Rubber (Vulcanizable 1,000
Elastomers).
2823 Cellulosic Manmade Fibers............ 1,000
2824 Manmade Organic Fibers, Except 1,000
Cellulosic.
2833 Medicinal Chemicals and Botanical 750
Products.
2834 Pharmaceutical Preparations.......... 750
2841 Soap and Other Detergents, Except 750
Specialty Cleaners.
2865 Cyclic Organic Crudes and 750
Intermediates, and Organic Dyes and
Pigments.
2869 Industrial Organic Chemicals, N.E.C.. 1,000
2873 Nitrogenous Fertilizers.............. 1,000
2892 Explosives........................... 750
2911 Petroleum Refining................... 1,500 \4\
2952 Asphalt Felts and Coatings........... 750
3011 Tires and Inner Tubes................ 1,000 \5\
3021 Rubber and Plastics Footwear......... 1,000
3211 Flat Glass........................... 1,000
3221 Glass Containers..................... 750
3229 Pressed and Blown Glass and 750
Glassware, N.E.C.
3241 Cement, Hydraulic.................... 750
3261 Vitreous China Plumbing Fixtures and 750
China and Earthenware Fittings and
Bathroom Accessories.
3275 Gypsum Products...................... 1,000
3292 Asbestos Products.................... 750
3296 Mineral Wool......................... 750
3297 Nonclay Refractories................. 750
3312 Steel Works, Blast Furnaces 1,000
(Including Coke Ovens), and Rolling Mills.
3313 Electrometallurgical Products, Except 750
Steel.
3315 Steel Wiredrawing and Steel Nails and 1,000
Spikes.
3316 Cold-Rolled Steel Sheet, Strip, and 1,000
Bars.
3317 Steel Pipe and Tubes................. 1,000
3331 Primary Smelting and Refining of 1,000
Copper.
3334 Primary Production of Aluminum....... 1,000
3339 Primary Smelting and Refining of 750
Nonferrous Metals, Except Copper and
Aluminum.
3351 Rolling, Drawing, and Extruding of 750
Copper.
3353 Aluminum Sheet, Plate, and Foil...... 750
3354 Aluminum Extruded Products........... 750
3355 Aluminum Rolling and Drawing, N.E.C.. 750
3356 Rolling, Drawing, and Extruding of 750
Nonferrous Metals, Except Copper and
Aluminum.
3357 Drawing and Insulating of Nonferrous 1,000
Wire.
3398 Metal Heat Treating.................. 750
3399 Primary Metal Products, N.E.C........ 750
3411 Metal Cans........................... 1,000
3431 Enameled Iron and Metal Sanitary Ware 750
3482 Small Arms Ammunition................ 1,000
3483 Ammunition, Except for Small Arms.... 1,500
3484 Small Arms........................... 1,000
3511 Steam, Gas, and Hydraulic Turbines, 1,000
and Turbine Generator Set Units.
3519 Internal Combustion Engines, N.E.C... 1,000
3531 Construction Machinery and Equipment. 750
3537 Industrial Trucks, Tractors, 750
Trailers, and Stackers.
3562 Ball and Roller Bearings............. 750
3571 Electronic Computers................. 1,000
3572 Computer Storage Devices............. 1,000
3575 Computer Terminals................... 1,000
3577 Computer Peripheral Equipment, N.E.C. 1,000
3578 Calculating and Accounting Machines, 1,000
Except Electronic Computers.
3585 Air-Conditioning and Warm Air Heating 750
Equipment and Commercial and Industrial
Refrigeration Equipment.
3612 Power, Distribution, and Speciality 750
Transformers.
3613 Switchgear and Switchboard Apparatus. 750
3621 Motors and Generators................ 1,000
3624 Carbon and Graphite Products......... 750
3625 Relays and Industrial Controls....... 750
3631 Household Cooking Equipment.......... 750
3632 Household Refrigerators and Home and 1,000
Farm Freezers.
3633 Household Laundry Equipment.......... 1,000
[[Page 58000]]
3634 Electric Housewares and Fans......... 750
3635 Household Vacuum Cleaners............ 750
3641 Electric Lamp Bulbs and Tubes........ 1,000
3651 Household Audio and Video Equipment.. 750
3652 Phonograph Records and Prerecorded 750
Audio Tapes and Disks.
3661 Telephone and Telegraph Apparatus.... 1,000
3663 Radio and Television Broadcasting and 750
Communications Equipment.
3669 Communications Equipment, N.E.C...... 750
3671 Electron Tubes....................... 750
3692 Primary Batteries, Dry and Wet....... 1,000
3694 Electrical Equipment for Internal 750
Combustion Engines.
3695 Magnetic and Optical Recording Media. 1,000
3699 Electrical Machinery, Equipment, and 750
Supplies, N.E.C.
3711 Motor Vehicles and Passenger Car 1,000
Bodies.
3714 Motor Vehicle Parts and Accessories.. 750
3716 Motor Homes.......................... 1,000
3721 Aircraft............................. 1,500
3724 Aircraft Engines and Engine Parts.... 1,000
3728 Aircraft Parts and Auxiliary 1,000 \9\
Equipment, N.E.C.
3731 Shipbuilding and Repair of Nuclear 1,000
Propelled Ships.
Shipbuilding of Nonnuclear Propelled 1,000
Ships and Nonpropelled Ships.
Ship Repair (Including Overhauls and 1,000
Conversions) Performed on Nonnuclear
Propelled and Nonpropelled Ships East
of the 108 Meridian.
Ships Repair (Including Overhauls and 1,000
Conversion) Performed on Nonnuclear
Propelled and Nonpropelled Ships West
of the 108 Meridian.
3743 Railroad Equipment................... 1,000
3761 Guided Missiles and Space Vehicles... 1,000
3764 Guided Missile and Space Vehicle 1,000
Propulsion Units and Propulsion Units
Parts.
3769 Guided Missiles and Space Vehicle 1,000
Parts and Auxiliary Equipment, N.E.C.
3795 Tanks and Tank Components............ 1,000
3812 Search, Detection, Navigation, 750
Guidance, Aeronautical, and Nautical
Systems and Instruments.
3996 Linoleum, Asphalted-Felt-Base, and 750
Other Hard Surface Floor Coverings, N.E.C.
================================================
DIVISION E--TRANSPORTATION, COMMUNICATIONS ELECTRIC, GAS, AND SANITARY
SERVICES
------------------------------------------------------------------------
MAJOR GROUP 40--RAILROAD TRANSPORTATION........ 1500
EXCEPT:
4013 Railroad Switching and Terminal 500
Establishments.
MAJOR GROUP 41--LOCAL AND SUBURBAN TRANSIT AND 5.0
INTERURBAN HIGHWAY AND PASSENGER
TRANSPORTATION.
MAJOR GROUP 42--MOTOR FREIGHT TRANSPORTATION 18.5
AND WAREHOUSING.
EXCEPT:
4212 (Part) Garbage and Refuse Collection, 6.0
Without Disposal.
4231 Terminal and Joint Terminal 5.0
Maintenance Facilities for Motor Freight
Transportation.
MAJOR GROUP 44--WATER TRANSPORTATION........... 500
EXCEPT:
4491 Marine Cargo Handling................ 18.5
4492 Towing and Tugboat Services.......... 5.0
4493 Marinas.............................. 5.0
4499 Water Transportation Services, N.E.C. 5.0
Offshore Marine Water Transportation 20.5
Services.
MAJOR GROUP 45--TRANSPORTATION BY AIR.......... 1500
EXCEPT:
4522 Air Transportation, Nonscheduled..... 1500
Offshore Marine Air Transportation 20.5
Services.
4581 Airports, Flying Fields, and Airport 5.0
Terminal Services.
MAJOR GROUP 46--PIPELINES, EXCEPT NATURAL GAS.. 1500
EXCEPT:
4619 Pipelines, N.E.C..................... 25.0
MAJOR GROUP 47--TRANSPORTATION SERVICES........ 5.0
EXCEPT:
4724 Travel Agencies...................... 1.0 \6\
4731 Arrangement of Transportation of 18.5
Freight and Cargo.
4783 Packing and Crating.................. 18.5
MAJOR GROUP 48--COMMUNICATIONS:
4812 Radiotelephone Communications........ 1,500
4813 Telephone Communications, Except 1,500
Radiotelephone.
[[Page 58001]]
4822 Telegraph and Other Message 5.0
Communications.
4832 Radio Broadcasting Stations.......... 5.0
4833 Television Broadcasting Stations..... 10.5
4841 Cable and Other Pay Television 11.0
Services.
4899 Communications Services, N.E.C....... 11.0
MAJOR GROUP 49--ELECTRIC, GAS, AND SANITARY 5.0
SERVICES.
EXCEPT:
4911 Electric Services.................... 4 million megawatt hrs.
4924 Natural Gas Distribution............. 500
4953 Refuse Systems....................... 6.0
4961 Steam and Air-Conditioning Supply.... 9.0
DIVISION F--WHOLESALE TRADE.................... 100
(Not Applicable to Government procurement of
supplies. The nonmanufacturer size standard
of 500 employees shall be used for purposes
of Government procurement of supplies.)
DIVISION G--RETAIL TRADE....................... 5.0
(Not Applicable to Government procurement of
supplies. The nonmanufacturer size standard
of 500 employees shall be used for purposes
of Government procurement of supplies.)
5271 Mobile Home Dealers.................. 9.5
5311 Department Stores.................... 20.0
5331 Variety Stores....................... 8.0
5411 Grocery Stores....................... 20.0
5511 Motor Vehicle Dealers (New and Used). 21.0
5521 Motor Vehicle Dealers (Used Only).... 17.0
5541 Gasoline Service Stations............ 6.5
5599 Automobile Dealers, N.E.C............ 5.0
Aircraft Dealers, Retail............. 7.5
5611 Men's and Boy's Clothing and 6.5
Accessory Stores.
5621 Women's Clothing Stores.............. 6.5
5651 Family Clothing Stores............... 6.5
5661 Shoe Stores.......................... 6.5
5722 Household Appliance Stores........... 6.5
5731 Radio, Television, and Consumer 6.5
Electronics Stores.
5734 Computer and Computer Software Stores 6.5
5812 Food Service, Institutional.......... 15.0
5961 Catalog and Mail-Order Houses........ 18.5
5983 Fuel Oil Dealers..................... 9.0
DIVISION H--FINANCE, INSURANCE, AND REAL ESTATE 5.0
EXCEPT:
6021-6082 National and Commercial Banks, 100 Million in
Savings, Institutions and Credit Unions. assets\7\
6331 Fire, Marine, and Casualty Insurance. 1,500
6515 (Part) Leasing of Building Space to 15.0\8\
Federal Government by Owners.
6531 Real Estate Agents and Managers...... 1.5 \6\
DIVISION I--SERVICES........................... 5.0
EXCEPT:
7211 Power Laundries, Family and 10.5
Commercial.
7213 Linen Supply......................... 10.5
7216 Drycleaning Plants, Except Rug 3.5
Cleaning.
7217 Carpet and Upholstery Cleaning....... 3.5
7218 Industrial Launderers................ 10.5
7311 Advertising Agencies................. 5.0\6\
7312 Outdoor Advertising Services......... 5.0\6\
7313 Radio, Television, and Publishers' 5.0\6\
Advertising Representatives.
7319 Advertising, N.E.C................... 5.0\6\
7349 Building Cleaning and Maintenance 12.0
Services, N.E.C..
7371 Computer Programming Services........ 18.0
7372 Prepackaged Software................. 18.0
7373 Computer Integrated Systems Design... 18.0
7374 Computer Processing and Data 18.0
Preparation and Processing Services.
7375 Information Retrieval Services....... 18.0
7376 Computer Facilities Management 18.0
Services.
7377 Computer Rental and Leasing.......... 18.0
7378 Computer Maintenance and Repair...... 18.0
7379 Computer Related Services, N.E.C..... 18.0
7381 Detective, Guard, and Armored Car 9.0
Services.
7382 Security Systems Services............ 9.0
[[Page 58002]]
7389 Business Services, N.E.C............. 5.0
Map Drafting Services, Mapmaking 3.5
(Including Aerial) and Photogrammetric
Mapping Services.
7513 Truck Rental and Leasing, Without 18.5
Drivers.
7514 Passenger Car Rental................. 18.5
7515 Passenger Car Leasing................ 18.5
7534 Tire Retreading and Repair Shops..... 10.5
7699 Repair Shops and Related Services, 5.0\9\
N.E.C..
7812 Motion Picture and Video Tape 21.5
Production.
7819 Services Allied to Motion Picture 21.5
Production.
7822 Motion Picture and Video Tape 21.5
Distribution.
8299 Flight Training Services............. 18.5
8711 Engineering Services................. 2.5
Military and Aerospace Equipment and 20.0
Military Weapons.
Contracts and Subcontracts for 20.0
Engineering Services Awarded Under the
National Energy Policy Act of 1992.
Marine Engineering and Naval 13.5
Architecture.
8712 Architectural Services (Other Than 2.5
Naval).
8713 Surveying Services................... 2.5
8721 Accounting, Auditing, and Bookkeeping 6.0
Services.
8731 Commercial Physical and Biological 500 \10\
Research.
Aircraft............................... 1,500
Aircraft Parts, and Auxiliary 1,000
Equipment, and Aircraft Engines and
Engine Parts.
Space Vehicles and Guided Missiles, 1,000
their Propulsion Units, their
Propulsion Units Parts, and their
Auxiliary Equipment and Parts.
8741 (Part) Conference Management Services 5.0 \6\
8744 Facilities Support Management 5.0 \11\
Services.
Base Maintenance....................... 20.0 \12\
Environmental Remediation Services..... 500 \13\
------------------------------------------------------------------------
Footnotes:
\1\ SIC code1629--Dredging: To be considered small for purpose of
Government procurement, a firm must perform at least 40 percent of the
volume dredged with its own equipment or equipment owned by another
small dredging concern.
\2\ SIC Division D--Manufacturing: For rebuilding machinery or equipment
on a factory basis, or equivalent, use the SIC code for a newly
manufactured product. Concerns performing major rebuilding or overhaul
activities do not necessarily have to meet the criteria for being a
``manufacturer'' although the activities may be classified under a
manufacturing SIC code. Ordinary repair services or preservation are
not considered rebuilding.
\3\ SIC code 2033: For purposes of Government procurement for food
canning and preserving, the standard of 500 employees excludes
agricultural labor as defined in Sec. 3306(k) of the Internal Revenue
Code, 26 U.S.C. 3306(k).
\4\ SIC code 2911: For purposes of Government procurement, the firm may
not have more than 1,500 employees nor more than 75,000 barrels per
day capacity of petroleum-based inputs, including crude oil or bona
fide feedstocks. Capacity includes owned or leased facilities as well
as facilities under a processing agreement or an arrangement such as
an exchange agreement or a throughput. The total product to be
delivered under the contract must be at least 90 percent refined by
the successful bidder from either crude oil or bona fide feedstocks.
\5\ SIC code 3011: For purposes of Government procurement, a firm is
small for bidding on a contract for pneumatic tires within Census
Classification codes 30111 and 30112, provided that: (1) The value of
tires within Census Classification codes 30111 and 30112 which it
manufactured in the United States during the previous calendar year is
more than 50 percent of the value of its total worldwide manufacture,
(2) the value of pneumatic tires within Census Classification codes
30111 and 30112 comprising its total worldwide manufacture during the
preceding calendar year was less than 5 percent of the value of all
such tires manufactured in the United States during that period, and
(3) the value of the principal product which it manufactured or
otherwise produced, or sold worldwide during the preceding calendar
year is less than 10 percent of the total value of such products
manufactured or otherwise produced or sold in the United States during
that period.
\6\ SIC codes 4724, 6531, 7311, 7312, 7313, 7319, and 8741: As measured
by total revenues, but excluding funds received in trust for an
unaffiliated third party, such as bookings or sales subject to
commissions. The commissions received are included as revenue.
\7\ A financial institution's assets are determined by averaging the
assets reported on its four quarterly financial statements for the
preceding year. Assets for the purposes of this size standard means
the assets defined according to the Federal Financial Institution
Examinations Council 034 call report form.
\8\ SIC code 6515: Leasing of building space to the Federal Government
by Owners: For Government procurement, a size standard of $15.0
million in gross receipts applies to the owners of building space
leased to the Federal Government. The standard does not apply to an
agent.
\9\ SIC codes 7699 and 3728: Contracts for the rebuilding or overhaul of
aircraft ground support equipment on a contract basis are classified
under SIC 3728.
\10\ SIC code 8731: For research and development contracts requiring the
delivery of a manufactured product, the appropriate size standard is
that of the manufacturing industry.
(1) Research and Development means laboratory or other physical
research and development. It does not include economic, educational,
engineering, operations, systems, or other nonphysical research; or
computer programming, data processing, commercial and/or medical
laboratory testing.
(2) For purposes of the Small Business Innovation Research (SBIR)
program only, a different definition has been established by law. See
Sec. 121.701 of these regulations.
(3) Research and development for guided missiles and space vehicles
includes evaluation and simulation, and other services requiring
thorough knowledge of complete missiles and spacecraft.
\11\ Facilities Management, a component of SIC code 8744, includes
establishments, not elsewhere classified, which provide overall
management and the personnel to perform a variety of related support
services in operating a complete facility in or around a specific
building, or within another business or Government establishment.
Facilities management means furnishing three or more personnel supply
services which may include, but are not limited to, secretarial
services, typists, telephone answering, reproduction or mimeograph
service, mailing service, financial or business management, public
relations, conference planning, travel arrangements, word processing,
maintaining files and/or libraries, switchboard operation, writers,
bookkeeping, minor office equipment maintenance and repair, or use of
information systems (not programming).
[[Page 58003]]
\12\ SIC code 8744: (1) If one of the activities of base maintenance, as
defined below, can be identified with a separate industry and that
activity (or industry) accounts for 50 percent or more of the value of
an entire contract, then the proper size standard is that of the
particular industry, and not the base maintenance size standard.
(2) ``Base Maintenance'' requires the performance of three or more
separate activities in the areas of service or special trade
construction industries. If services are performed, these activities
must each be in a separate SIC code including, but not limited to,
Janitorial and Custodial Service, Fire Prevention Service, Messenger
Service, Commissary Service, Protective Guard Service, and Grounds
Maintenance and Landscaping Service. If the contract requires the use
of special trade contractors (plumbing, painting, plastering,
carpentry, etc.), all such special trade construction activities are
considered a single activity and classified as Base Housing
Maintenance. Since Base Housing Maintenance is only one activity, two
additional activities are required for a contract to be classified as
``Base Maintenance.''
\13\ SIC code 8744: (1) For SBA assistance as a small business concern
in the industry of Environmental Remediation Services, other than for
Government procurement, a concern must be engaged primarily in
furnishing a range of services for the remediation of a contaminated
environment to an acceptable condition including, but not limited to,
preliminary assessment, site inspection, testing, remedial
investigation, feasibility studies, remedial design, containment,
remedial action, removal of contaminated materials, storage of
contaminated materials and security and site closeouts. If one of such
activities accounts for 50 percent or more of a concern's total
revenues, employees, or other related factors, the concern's primary
industry is that of the particular industry and not the Environmental
Remediation Services Industry.
(2) For purposes of classifying a Government procurement as
Environmental Remediation Services, the general purpose of the
procurement must be to restore a contaminated environment and also the
procurement must be composed of activities in three or more separate
industries with separate SIC codes or, in some instances (e.g.,
engineering), smaller sub-components of SIC codes with separate,
distinct size standards. These activities may include, but are not
limited to, separate activities in industries such as: Heavy
Construction; Special Trade Construction; Engineering Services;
Architectural Services; Management Services; Refuse Systems; Sanitary
Services, Not Elsewhere Classified; Local Trucking Without Storage;
Testing Laboratories; and Commercial, Physical and Biological
Research. If any activity in the procurement can be identified with a
separate SIC code, or component of a code with a separate distinct
size standard, and that industry accounts for 50 percent or more of
the value of the entire procurement, then the proper size standard is
the one for that particular industry, and not the Environmental
Remediation Service size standard.
Size Eligibility For SBA Financial Assistance
Sec. 121.301 What size standards are applicable to financial
assistance programs?
(a) For Business Loans and Disaster Loans (other than physical
disaster loans), an applicant must not exceed the size standard for the
industry in which:
(1) The applicant combined with its affiliates is primarily
engaged; and
(2) The applicant alone is primarily engaged.
(b) For Development Company programs, an applicant must meet one of
the following standards:
(1) Including its affiliates, net worth not in excess of $6
million, and average net income after Federal income taxes (excluding
any carry-over losses) for the preceding two completed fiscal years not
in excess of $2 million; or
(2) The same standards applicable under paragraph (a) of this
section.
(c) For the Small Business Investment Company (SBIC) program, an
applicant must meet one of the following standards:
(1) Including its affiliates, net worth not in excess of $18
million average and net income after Federal income taxes (excluding
any carry-over losses) for the preceding 2 completed fiscal years not
in excess of $6 million; or
(2) The same standards applicable under paragraph (a) of this
section.
(d) For Surety Bond Guarantee assistance--
(1) Any construction (general or special trade) concern or concern
performing a contract for services is small if its average annual
receipts do not exceed $5.0 million.
(2) Any concern not specified in paragraph (d)(1) of this section
must meet the size standard for the primary industry in which it,
combined with its affiliates, is engaged.
(e) The applicable size standards for the purpose of all SBA
financial assistance programs, excluding the Surety Bond Guarantee
assistance program, are increased by 25 percent whenever the applicant
agrees to use the assistance within a labor surplus area. Labor surplus
areas are listed monthly in the Department of Labor publication called
``Area Trends.''
Sec. 121.302 When does SBA determine the size status of an applicant?
(a) The size of an applicant for SBA financial assistance is
determined as of the date the application for such financial assistance
is received by SBA, except for the Disaster Loan and Preferred Lenders
programs.
(b) For the Preferred Lenders program, size is determined as of the
date of approval of the loan by the Preferred Lender.
(c) For disaster loan assistance (other than physical disaster
loans), size status is determined as of the date the disaster
commenced, as set forth in the Disaster Declaration.
(d) Changes in size subsequent to the applicable date when size is
determined will not disqualify an applicant for assistance.
Sec. 121.303 What size procedures are used by SBA before it makes a
formal size determination?
(a) A concern that submits an application for financial assistance
is deemed to have certified that it is small under the applicable size
standard. SBA may question the concern's status based on information
supplied in the application or from any other source.
(b) A small business investment company, a development company, a
surety bond company, or a preferred lender may accept as true the size
information provided by an applicant, unless credible evidence to the
contrary is apparent.
(c) Size is initially considered by the individual with final
financial assistance authority. This is not a formal size
determination. A formal determination may be requested prior to a
denial of eligibility based on size.
(d) An applicant may request a formal size determination when
assistance has been denied for size ineligibility. Except for disaster
loan eligibility, a request for a formal size determination must be
made to the Government Contracting Area Director serving the area in
which the headquarters of the applicant is located, regardless of the
location of the parent company or affiliates. For disaster loan
assistance, the request for a size determination must be made to the
Area Director for the Disaster Area Office which denied the assistance.
(e) There are no time limitations for making a formal size
determination for purposes of financial assistance. The official making
the formal size determination must provide a copy of the determination
to the applicant, to the requesting SBA official, and to other
interested SBA program officials.
Sec. 121.304 What are the size requirements for refinancing an
existing SBA loan?
If natural growth (as distinguished from merger, acquisition or
similar management action) since the date of original financing causes
a firm to exceed its applicable size standard, it will still be small
for the purpose of refinancing an existing SBA loan or guarantee.
Otherwise, the firm and its affiliates must be small at the time of
application for refinancing.
[[Page 58004]]
Sec. 121.305 What size eligibility requirements exist for obtaining
business loans relating to particular procurements?
A concern qualified as small for a particular procurement,
including an 8(a) subcontract, is small for financial assistance
directly and primarily relating to the performance of the particular
procurement.
Size Eligibility Requirements for Government Procurement
Sec. 121.401 What procurement programs are subject to size
determinations?
The requirements set forth in Secs. 121.401-121.412 cover all
procurement programs for which status as a small business is required,
including the small business set-aside program, SBA's Certificate of
Competency Program, SBA's Minority Enterprise Development program, the
Small Business Subcontracting program authorized under section 8(d) of
the Small Business Act, and federal Small Disadvantaged Business
programs.
Sec. 121.402 What size standards are applicable to procurement
assistance programs?
(a) A concern must meet the size standard for the SIC code
specified in the solicitation.
(b) The procuring agency contracting officer, or authorized
representative, designates the proper SIC code and size standard in a
solicitation, selecting the SIC code which best describes the principal
purpose of the product or service being acquired. Primary consideration
is given to the industry descriptions in the SIC Manual, the product or
service description in the solicitation and any attachments to it, the
relative value and importance of the components of the procurement
making up the end item being procured, and the function of the goods or
services being purchased. Other factors considered include previous
Government procurement classifications of the same or similar products
or services, and the classification which would best serve the purposes
of the Small Business Act. A procurement is usually classified
according to the component which accounts for the greatest percentage
of contract value.
(c) The SIC code assigned to a procurement and its corresponding
size standard is final unless timely appealed to SBA's Office of
Hearings and Appeals (OHA), or unless SBA assigns a SIC code or size
standard as provided in paragraph (d) of this section.
(d) An unclear, incomplete or missing SIC code designation or size
standard in the solicitation may be clarified, completed or supplied by
SBA in connection with a formal size determination or size appeal.
(e) Any offeror or other interested party adversely affected by a
SIC code designation or size standard designation may appeal the
designations to OHA under Part 134 of this chapter.
Sec. 121.403 Are SBA size determinations and SIC code designations
binding on parties?
Formal size determinations and SIC code designations made by
authorized SBA officials are binding upon the parties. Opinions
otherwise provided by SBA officials to contracting officers or others
are advisory in nature, and are not binding or appealable.
Sec. 121.404 When does SBA determine the size status of a business
concern?
Generally, SBA determines the size status of a concern (including
its affiliates) as of the date the concern submits a written self-
certification that it is small to the procuring agency as part of its
initial offer including price. The following are two exceptions to this
rule:
(a) The size status of an applicant for a Certificate of Competency
(COC) relating to an unrestricted procurement is determined as of the
date of the concern's application for the COC.
(b) Size status for purposes of compliance with the nonmanufacturer
rule set forth in Sec. 121.406(b)(1) and the ostensible subcontractor
rule set forth in Sec. 121.103(f)(3) is determined as of the date of
the best and final offer.
Sec. 121.405 May a business concern self-certify its small business
size status?
(a) A concern must self-certify it is small under the size standard
specified in the solicitation, or as clarified, completed or supplied
by SBA pursuant to Sec. 121.402(d).
(b) A contracting officer may accept a concern's self-certification
as true for the particular procurement involved in the absence of a
written protest by other offerors or other credible information which
causes the contracting officer or SBA to question the size of the
concern.
(c) Procedures for protesting the self-certification of an offeror
are set forth in Secs. 121.1001-121.1009.
Sec. 121.406 How does a small business concern qualify to provide
manufactured products under small business set-aside or MED
procurements?
(a) General. In order to qualify as a small business concern for a
small business set-aside or 8(a) contract to provide manufactured
products, an offeror must either:
(1) Be the manufacturer of the end item being procured (and the end
item must be manufactured or produced in the United States); or
(2) Comply with the requirements of paragraphs (b), (c) or (d) of
this section as a nonmanufacturer, a kit assembler or a supplier under
Simplified Acquisition Procedures.
(b) Nonmanufacturers. (1) A concern may qualify for a requirement
to provide manufactured products as a nonmanufacturer if it:
(i) Does not exceed 500 employees;
(ii) Is primarily engaged in the wholesale or retail trade and
normally sells the items being supplied to the general public; and
(iii) Will supply the end item of a small business manufacturer or
processor made in the United States, or obtains a waiver of such
requirement pursuant to paragraph (b)(3) of this section.
(2) For size purposes, there can be only one manufacturer of the
end item being acquired. The manufacturer is the concern which, with
its own facilities, performs the primary activities in transforming
inorganic or organic substances, including the assembly of parts and
components, into the end item being acquired. The end item must possess
characteristics which, as a result of mechanical, chemical or human
action, it did not possess before the original substances, parts or
components were assembled or transformed. The end item may be finished
and ready for utilization or consumption, or it may be semifinished as
a raw material to be used in further manufacturing. Firms which perform
only minimal operations upon the item being procured do not qualify as
manufacturers of the end item. SBA will evaluate the following factors
in determining whether a concern is the manufacturer of the end item:
(i) The proportion of total value in the end item added by the
efforts of the concern, excluding costs of overhead, testing, quality
control, and profit; and
(ii) The importance of the elements added by the concern to the
function of the end item, regardless of their relative value.
(3) The Administrator or designee may waive the requirement set
forth in paragraph (b)(1)(iii) of this section under the following two
circumstances:
(i) The contracting officer has determined that no small business
manufacturer or processor reasonably can be expected to offer a product
meeting the specifications (including period for performance) required
by a particular solicitation and SBA reviews and accepts that
determination; or
(ii) SBA determines that no small business manufacturer or
processor of
[[Page 58005]]
the product or class of products is available to participate in the
Federal procurement market.
(4) The two waiver possibilities identified in paragraph (b)(3) of
this section are called ``individual'' waivers and ``class'' waivers
respectively, and the procedures for them are contained in
Sec. 121.1301.
(5) Any SBA waiver of the nonmanufacturer rule has no effect on
requirements external to the Small Business Act which involve domestic
sources of supply, such as the Buy American Act.
(c) Kit assemblers. (1) Where the manufactured item being acquired
is a kit of supplies or other goods provided by an offeror for a
special purpose, the offeror cannot exceed 500 employees, and 50
percent of the total value of the components of the kit must be
manufactured by business concerns in the United States which are small
under the size standards for the SIC codes of the components being
assembled. The offeror need not itself be the manufacturer of any of
the items assembled.
(2) Where the Government has specified an item for the kit which is
not produced by U.S. small business concerns, such item shall be
excluded from the calculation of total value in paragraph (c)(1) of
this section.
(d) Simplified Acquisition Procedures. Where the procurement of a
manufactured item is processed under Simplified Acquisition Procedures,
as defined in Sec. 13.101 of the Federal Acquisition Regulation (FAR)
(48 CFR 13.101), and where the anticipated cost of the procurement will
not exceed $25,000, the offeror need not supply the end product of a
small business concern as long as the product acquired is manufactured
or produced in the United States, and the offeror does not exceed 500
employees. The offeror need not itself be the manufacturer of any of
the items acquired.
Sec. 121.407 What are the size procedures for multiple item
procurements?
If a procurement calls for two or more specific end items or types
of services with different size standards and the offeror may submit an
offer on any or all end items or types of services, the offeror must
meet the size standard for each end item or service item for which it
submits an offer. If the procurement calls for more than one specific
end item or type of service and an offeror is required to submit an
offer on all items, the offeror may qualify as a small business for the
procurement if it meets the size standard of the item which accounts
for the greatest percentage of the total contract value.
Sec. 121.408 What are the size procedures for SBA's Certificate of
Competency Program?
(a) A firm which applies for a COC must file an ``Application for
Small Business Size Determination'' (SBA Form 355). If the initial
review of SBA Form 355 indicates the applicant, including its
affiliates, is small for purposes of the COC program, SBA will process
the application for COC. If the review indicates the applicant,
including its affiliates, is other than small, SBA will initiate a
formal size determination as set forth in Sec. 121.1009. In such a
case, SBA will not further process the COC application until a formal
size determination is made.
(b) A concern is ineligible for a COC if a formal SBA size
determination finds the concern other than small.
Sec. 121.409 What size standard applies in an unrestricted procurement
for Certificate of Competency purposes?
For the purpose of receiving a Certificate of Competency in an
unrestricted procurement, the applicable size standard is that
corresponding to the SIC code set forth in the solicitation. For a
manufactured product, a concern must also furnish a domestically
produced or manufactured product, regardless of the size status of the
product manufacturer. The offeror need not be the manufacturer of any
of the items acquired.
Sec. 121.410 What are the size standards for SBA's Section 8(d)
Subcontracting Program?
For subcontracting purposes pursuant to section 8(d) of the Small
Business Act, a concern is small:
(a) For subcontracts of $10,000 or less which relate to Government
procurements, if its number of employees (including its affiliates)
does not exceed 500 employees. However, subcontracts for engineering
services awarded under the National Energy Policy Act of 1992 have the
same size standard as Military and Aerospace Equipment and Military
Weapons under SIC code 8711;
(b) For subcontracts exceeding $10,000 which relate to Government
procurements, if its number of employees or average annual receipts
(including its affiliates) does not exceed the size standard for the
product or service it is providing on the subcontract; and
(c) For subcontracts for financial services, if the concern
(including its affiliates) is a commercial bank or savings and loan
association whose assets do not exceed $100 million.
Sec. 121.411 What are the size procedures for SBA's Section 8(d)
Subcontracting Program?
(a) Prime contractors may rely on the information contained in
SBA's Procurement Automated Source System (PASS), or equivalent data
base maintained or sanctioned by SBA, as an accurate representation of
a concern's size and ownership characteristics for purposes of
maintaining a small business source list. Even though a concern is on a
small business source list, it must still qualify and self-certify as a
small business at the time it submits its offer as a section 8(d)
subcontractor.
(b) Upon determination of the successful subcontract offeror for a
competitive subcontract, but prior to award, the prime contractor must
inform each unsuccessful subcontract offeror in writing of the name and
location of the apparent successful offeror.
(c) The self-certification of a concern subcontracting or proposing
to subcontract under section 8(d) of the Small Business Act may be
protested by the contracting officer, the prime contractor, the
appropriate SBA official or any other interested party.
Sec. 121.412 What are the size procedures for partial small business
set-asides?
A firm is required to meet size standard requirements only for the
small business set-aside portion of a procurement, and is not required
to qualify as a small business for the unrestricted portion.
Size Eligibility Requirements for Sale or Lease of Government Property
Sec. 121.501 What programs for sale or lease of Government property
are subject to size determinations?
Sections 121.501-121.512 apply to small business size
determinations for the purpose of the sale or lease of Government
property, including the Timber Sales Program, the Special Salvage
Timber Sales Program, and the sale of Government petroleum, coal and
uranium.
Sec. 121.502 What size standards are applicable to programs for sale
or lease of Government property?
(a) Unless otherwise specified in this part--
(1) A concern primarily engaged in manufacturing is small for sale
or lease of Government property if it does not exceed 500 employees;
(2) A concern not primarily engaged in manufacturing is small for
sale or lease of Government property if it has annual receipts not
exceeding $2 million.
[[Page 58006]]
(b) Size status for such sales and leases is determined by the
primary industry of the applicant business concern.
Sec. 121.503 Are SBA size determinations binding on parties?
Formal size determinations based upon a specific Government sale or
lease, or made 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. 121.1001-121.1009.
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 it own
employees to perform at least two of the following: felling and
bucking, yarding, and loading.
Sec. 121.507 What are the size standards 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 is 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
(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 standards 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 sublease 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
[[Page 58007]]
refinancing 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.
(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-
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;
(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. 121.1001-121.1009.
Size Eligibility Requirements for Paying Reduced Patent Fees
Sec. 121.801 May patent fees be reduced if a concern is small?
Sections 121.801-121.805 apply to size status for the purpose of
paying reduced patent fees authorized by Pub. L. 97-247. 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.
[[Page 58008]]
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) Question concerning the size verification are resolved
initially by the Patent and Trademark Office. If not verified as small,
the applicant may request a formal SBS 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 comments relating to the
size standards 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
paragraph (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.
[[Page 58009]]
(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.
(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.
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 size 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 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 (b)(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.
[[Page 58010]]
(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.
(d) Burden of persuasion. The concern whose size is under
consideration has the burden of establishing its small business size.
(e) 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.
(f) 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.
(g) 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.
(h) 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, or unless the concern is
formally recertified as a small business by SBA.
(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.
(i) Limited reopening of size determinations. In cases where the
size determination contains clear administrative error or a clear
mistake of fact, the SBA office that made the size determination 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;
[[Page 58011]]
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 Eligibility Provisions
Eligibility of Organizations for the Handicapped for Small Business
Set-asides
Sec. 121.1201 May handicapped organizations be awarded Federal
procurements set aside for small business?
Section 15 of the Small Business Act, 15 U.S.C. 644(c), provides
that public or private organizations for the handicapped are eligible
to participate in Federal procurements which are set aside for small
business.
Sec. 121.1202 What is an organization for the handicapped?
An organization for the handicapped means a public or private
entity:
(a) Which is organized under the laws of the United States or any
state and operated in the interest of handicapped individuals, the net
income of which does not inure in whole or in part to the benefit of
any shareholder or other individual; and
(b) Which complies with any applicable occupational health and
safety standard prescribed by the Secretary of Labor.
Sec. 121.1203 Who are handicapped individuals?
A handicapped individual means a person who has a physical, mental,
or emotional impairment, defect, ailment, disease, or disability of a
permanent nature which in any way limits the selection of any type of
employment for which the person would otherwise be qualified or
qualifiable.
Sec. 121.1204 What are the eligibility requirements for organizations
for the handicapped to receive awards of contracts set aside for small
business?
Organizations for the handicapped are eligible if at least 75
percent of the direct labor performed on each item being produced under
the contract, or performed in providing each type of service under the
contract, is performed by handicapped individuals, and the statutory
maximum allowable amount of such awards for the applicable fiscal year
has not been reached.
Sec. 121.1205 What are the procedures for filing protests of the
status of handicapped organizations?
(a) Who may protest. A responsive offeror, the affected contracting
officer, or SBA may file a protest.
(b) Procedure to protest and time frame. A protest must be
delivered to the contracting officer by hand, telegram, or be placed in
the U.S. mail prior to the close of business on the fifth working day
after bid opening, or, in the case of a negotiated procurement, the
fifth working day after receipt of notification of the identity of the
apparent successful offeror.
(c) Protest must be specific. Protests must allege specific
information tending to show that the protested organization does not
meet the eligibility criteria.
(d) Receipt of protest by SBA from contracting officer. The
contracting officer who received the protest must promptly forward it
to the Associate Administrator for Government Contracting, Small
Business Administration, 409 Third Street, S.W., Washington, D.C.
20416.
(e) Notice to the protested organization. SBA will notify the
protested organization in writing of the protest and request
documentation addressing the allegations supporting the protest.
(f) Required response from protested organization. Within three
business days of receipt of written notification of the protest from
SBA, the protested organization must provide SBA with required
documentation, including any other documentation or information it
wishes SBA to consider. Failure to submit required documentation may be
grounds for a finding against the protested organization.
(1) Except as provided in paragraph (f)(2) of this section, the
following documentation, where applicable, must be provided to SBA in
order to demonstrate the eligibility of an organization:
(i) A copy of the articles of incorporation of the protested
organization showing the date of filing and the signature of an
appropriate State official.
(ii) A copy of the bylaws of the protested organization.
(iii) If the articles of incorporation or bylaws do not include a
statement to the effect that no part of its net income may inure to the
benefit of any shareholder or other individual, one of the following
documents:
(A) A certified copy of the State statute under which the
organization was incorporated which includes wording to the effect that
no part of its net income may inure to the benefit of any shareholder
or other individual;
(B) A copy of a resolution approved by the governing body of the
corporation, certified by an officer of the corporation, to the effect
that no part of its net income may inure to the benefit of any
shareholder or other individual; or
(C) A copy of the Internal Revenue Service certificate, duly
executed during the prior twelve months, indicating that the
corporation has been accepted as a non-profit agency for taxation
purposes.
[[Page 58012]]
(2) A State-owned or State-operated workshop for the blind or other
severely handicapped shall demonstrate its eligibility by submitting
the following documents:
(i) A certified copy of the State statute establishing or
authorizing the establishment of a workshop for the handicapped; and
(ii) In the case of a wholly-owned State corporation, a certified
copy of the corporate bylaws; and, in the case of a State agency, a
certified true copy of implementing regulations, operating procedures,
notice of establishment of the workshop, or other similar documents.
(3) If the protested organization is a workshop participating under
the Javits-Wagner-O'Day Program, the required documentation may be
delivered by the Committee for Purchase from the Blind and Other
Severely Handicapped which maintains workshop eligibility documentation
on file in its offices. Delivery may be made by hand, telegram or
placement in the U.S. Postal Service.
(g) Required consultation. The Associate Administrator for
Government Contracting will consult with the Executive Director of the
Committee for Purchase from the Blind and other Severely Handicapped
before rendering a determination.
(h) Notice of decision. SBA shall, within ten business days of
receipt of a protest, notify all parties of its decision. Notification
will be considered complete upon hand delivery, receipt of a telegram,
or placement in the U.S. Postal Service.
(i) Final SBA decision. The Associate Administrator for Government
Contracting makes the final Agency decision.
Sec. 121.1206 How does SBA handle appeals of economic impact?
A proposed award of a small business set-aside to an organization
for the handicapped may be appealed to SBA if a small business concern
has experienced or is likely to experience severe economic injury as
the result of the proposed award.
(a) Who may appeal. An appeal may be filed by a small business
concern making an offer on the solicitation which:
(1) Is or was the incumbent contractor on a predecessor contract
for the services or products being solicited; or
(2) Was the apparent otherwise successful offeror on a prior small
business set-aside contract that was awarded to an organization for the
handicapped.
(b) Grounds for appeal. (1) An incumbent contractor must show that:
(i) Absent competition by organizations for the handicapped, it is
likely to receive the instant award; and
(ii) The dollar amount of the instant award represents at least 25
percent of the concern's annual receipts in its most recently completed
fiscal year.
(2) Offerors appealing on the grounds of prior small business set-
aside contract awards to organizations for the handicapped must show
that:
(i) Absent competition by organizations for the handicapped, it is
likely to receive the instant award;
(ii) The dollar amount of the instant award represents at least 25
percent of the concern's annual receipts in its most recently completed
fiscal year; and
(iii) The dollar amount of the prior small business set-aside
contract awarded to an organization for the handicapped for which the
concern was the apparent otherwise successful offeror represented at
least 25 percent of its annual receipts for the fiscal year in which
the contract was awarded. If the fiscal year in which the prior
contract was awarded to an organization for the handicapped is not yet
completed, the award must represent at least 25 percent of the
concern's most recently completed fiscal year.
(c) Procedure for appeal. (1) Appeals must be submitted to the
contracting officer who must promptly forward them to the Associate
Administrator for Government Contracting, Small Business
Administration, 409 3rd Street, S.W., Washington, D.C. 20416. The
Associate Administrator makes the final Agency decision.
(2) Appeals must be delivered by hand, telegraph, or placed in the
United States mail, by the close of business of the tenth calendar day
after opening of bids or, in the case of negotiated procurements, after
receipt of notification of the identity of the apparent successful
offeror.
(3) The Associate Administrator will consult with the Executive
Director of the Committee for Purchase from the Blind and Other
Severely Handicapped and will decide the appeal within ten working days
after its receipt.
(4) The Associate Administrator will notify the appellant and
contracting officer of SBA's decision and require the contracting
officer to proceed with award or to make an award without regard to
offers by organizations for the handicapped.
Waivers of the Nonmanufacturer Rule for Classes of Products
Sec. 121.1301 What is the Nonmanufacturer Rule?
The Nonmanufacturer Rule is set forth in Sec. 121.406(b).
Sec. 121.1302 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 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
[[Page 58013]]
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. 121.1303 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. 121.1304 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.
(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 (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 process 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 specific item is required;
(ii) The solicitation number, SIC code, dollar amount of the
procurement, and a brief statement of the procurement history;
(iii) A determination by the contracting officer that there are no
known small business manufacturers or processors for the requested
items (the determination must contain a narrative statement of the
contracting officer's efforts to search for small business
manufacturers or processors of the item and the results of those
efforts, and a statement by the contracting officer that there are no
known small business manufacturers for the items and that no small
business manufacturer or processor can reasonably be expected to offer
the required items); and
(iv) For contracts expected to exceed $500,000, a copy of the
Statement of Work.
(2) Requests should be addressed to the Associate Administrator for
Government Contracting, Small Business Administration, 409 3rd Street,
S.W., Washington, D.C. 20416.
(3) SBA will examine the contracting officer's determination and
any other information it deems necessary to make an informed decision
on the individual waiver request. If SBA's research verifies that no
small business manufacturers or processors exist for the item, the
Associate Administrator for Government Contracting will grant an
individual, one-time waiver. If a small business manufacturer or
processor is found for the product in question, the Associate
Administrator will deny the request. Either decision represents a final
decision by SBA.
Sec. 121.1305 How is a list of previously granted class waivers
obtained?
A list of classes of products for which waivers of the
Nonmanufacturer Rule have been granted will be maintained in SBA's
Procurement Automated Source System (PASS). A list of such waivers may
also be obtained by contacting the Office of Government Contracting at
the Small Business Administration, Washington, D.C. 20416, or at the
nearest SBA Government Contracting Area Office.
Dated: November 11, 1995.
Philip Lader,
Administrator.
[FR Doc. 95-28449 Filed 11-22-95; 8:45 am]
BILLING CODE 8025-01-P
