06-5894. Small Business Size Standards; Security Guards and Patrol Services Industry

AGENCY:

Small Business Administration (SBA).

ACTION:

Final rule.

SUMMARY:

The U.S. Small Business Administration (SBA) is increasing the small business size standard for Security Guards and Patrol Services (North American Industry Classification System (NAICS) 561612), from $11.5 million in average annual receipts to $17.0 million. This revised size standard better defines the size of a small business in this industry based on a review of the latest available data on industry characteristics and other relevant information.

DATES:

This rule is effective July 31, 2006.

FOR FURTHER INFORMATION CONTACT:

Carl J. Jordan, Office of Size Standards, [phone], or [e-mail].

SUPPLEMENTARY INFORMATION:

On November 10, 2005, SBA proposed in the Federal Register (70 FR 68368) a 47.6 percent increase to the small business size standard for Security Guards and Patrol Services, NAICS 561612, from $10.5 million in average annual receipts to $15.5 million. SBA later issued an interim final rule on December 6, 2005 (70 FR 72577), increasing all receipts-based small business size standards to account for inflation that had occurred since its last increase for inflation on February 22, 2002. That interim final rule, which became effective on December 6, 2005, including an inflationary adjustment increase in the Security Guards and Patrol Services size standard from $10.5 million to $11.5 million.

In this final rule, SBA is adopting the same 47.6 percent increase in the Security Guards and Patrol Services size standard that it proposed on November 10, 2005. As applied to the current inflation-adjusted size standard of $11.5 million, the new size standard under this final rule is $17 million ($11,500,000 x 1.476 = $16,978,000, rounded to the nearest $500,000 increment, or $17,000,000). Based on SBA's evaluation of the one public comment it received in response to its November 10, 2005 proposed rule (see discussion below) and on SBA's analysis described in the proposed rule, SBA believes that this 47.6 percent increase is appropriate under the methodology SBA uses in evaluating size standards. As described in the proposed rule, SBA evaluates an industry's size standard by comparing that industry's characteristics to the characteristics and size standards established for other industries. Applying the proposed 47.6 percent increase to the current inflation-adjusted size standard maintains the relative relationship between the Security Guards and Patrol Services Industry size standard and the size standards of other industries as supported by the proposed rule's analysis.

Evaluation of Comments

In response to its November 10, 2005, proposed rule, SBA received one comment from a business concern in the Security Guards and Patrol Services Industry. The commenter recommended a size standard double that of SBA's proposal. In support of that recommendation, the commenter pointed out that there are increased security needs on various facilities, especially those of the Federal Government. SBA considered that issue as part of its decision to propose a 47.6 percent increase to the standard. SBA also examined newly available data on Federal contracting for Security Guards and Patrol Services. While some Federal contracts may be expanding in scope in response to heightened security concerns, the data do not show that the apparent increase in the size of Security Guards and Patrol Services contracts has necessarily diminished small business opportunities, so as to require an increase in the size standard beyond the amount SBA is implementing in this final rule. Accordingly, SBA declines to adopt the comment.

Compliance With Executive Orders 12866, 12988, and 13132, the Regulatory Flexibility Act (5 U.S.C. 601-612) and the Paperwork Reduction Act (44 U.S.C. Ch. 35)

The Office of Management and Budget has determined that this rule is not a significant regulatory action for purposes of Executive Order 12866. This final rule meets the applicable standards set forth in sections 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguities and reduce burden to the extent practicable. The final rule does not have a retroactive or preemptive effect. This final rule will not have a substantial direct affect on the States or the distribution of power and responsibilities among various levels of government. Therefore, for purposes of Executive Order 13132, SBA has determined that this final rule does not have any Federalism implications warranting the preparation of a federalism assessment. For the purposes of the Paperwork Reduction Act, 44 U.S.C. Ch. 35, SBA has determined that this rule does not impose new reporting or recordkeeping requirements.

Final Regulatory Flexibility Analysis

Under the Regulatory Flexibility Act, this rule may have a significant impact on a substantial number of small entities engaged in the Security Guards and Patrol Services Industry. SBA described in the proposed rule the possible effects on business concerns seeking SBA 7(a) and 504 Guaranteed Loan Programs, and SBA's Economic Injury Disaster Loans. In addition, it affects those concerns that participate in Federal procurement programs for small businesses. The amended size standard may also affect small businesses participating in programs of other agencies that use SBA size standards. As a practical matter, SBA cannot estimate the impact of a revised size standard on every Federal program that uses its size standards. Nevertheless, SBA did not receive any comments raising concerns about the use of the proposed size standard on other Federal programs or regulations.

Immediately below, SBA sets forth its Final Regulatory Flexibility Analysis for this rule on the Security Guards and Patrol Services Industry addressing the following: (1) The need for and objective of the rule; (2) significant issues the public raised in its comments; (3) SBA's description and estimate of the number of small entities to which the rule will apply; (4) the projected reporting, recordkeeping, and other compliance requirements of the rule, and SBA's estimate of the classes of small entities that will be subject to the requirements; and, (5) steps SBA took to minimize the significant economic impact on small entities.

1. Need for and Objective of the Rule

The revised size standard for the Security Guards and Patrol Services Industry better defines the size of a small business in this industry that should be eligible for Federal small business assistance programs. Before SBA proposed increasing the size standard for this industry, it reviewed the structure of this industry using five factors that were compared with averages for two groups of comparable industries. A review of the latest available industry and program data supports the adopted increase to the current size standard.

2. Significant Issues the Public Raised in Its Comments

SBA received one comment from a business concern in the Security Guards and Patrol Services Industry. The commenter supported a size standard double that of SBA's proposal, because of increased security needs on various facilities, especially those of the Federal Government. SBA considered this issue in its analysis supporting the proposed size standard and in its review of Federal contracting data that became available after the publication of the proposed rule. SBA's analyses of that data do not provide a basis for increasing the size standard beyond the 47.6 percent that SBA originally proposed. Therefore, SBA is not making any change in the amount of proposed increase, other than applying it to the current inflation-adjusted size standard of $11.5 million, resulting in a new size standard of $17 million. SBA received no comments regarding its Initial Regulatory Flexibility Analysis.

3. SBA's Description and Estimate of the Number of Small Entities To Which the Rule Will Apply

SBA estimates that 55 additional firms out of 4,853 firms in this industry [i.e., 2.1 percent of total firms] would be considered small as a result of this final rule. These firms will be eligible to seek available SBA assistance if they meet other program requirements. The estimated number of firms becoming eligible for SBA assistance because of this rule cumulatively generate $950 million in this industry out of a total of $13.6 billion in annual receipts. The small business coverage in this industry will increase by 7.0 percent of total receipts. In addition, SBA estimates that approximately 65 small businesses that are within 20 percent of the existing size standard could grow and retain their small business status under the $17 million size standard.

4. Projected Reporting, Recordkeeping, and Other Compliance Requirements of the Rule, and SBA's Estimate of the Classes of Small Entities That Will Be Subject to the Requirements

A new size standard does not impose any additional reporting, recordkeeping or compliance requirements on small entities. Increasing size standards expands access to SBA programs that assist small businesses, and does not impose a regulatory burden because it neither regulates nor controls business behavior.

5. Steps SBA Took To Minimize the Significant Economic Impact on Small Entities

SBA considered an alternative size standard based on average number of employees instead of average annual receipts. It also considered a range of size standards as part of the assessment of each evaluation factor. Because of the large proportion of part-time employees in this industry, an employee size standard could unintentionally influence decisions of some firms to alter the use of part-time employees and subcontractors to remain as small businesses. SBA believes that a moderate increase to the size standard will assist businesses that should be included as small businesses and small businesses that are growing. In adopting a $17 million size standard, currently defined small businesses will not be competitively disadvantaged as compared to a much higher size standard. SBA did not receive any comments raising concerns about an adverse impact on currently defined small businesses of a higher size standard.

List of Subjects in 13 CFR Part 121

• Government procurement
• Government property
• Loan programs “business
• Small businesses”

For the reasons stated in the preamble, the Small Business Administration amends 13 CFR part 121 as follows.

PART 121—SMALL BUSINESS SIZE REGULATIONS

The authority citation for part 121 continues to read as follows:

Authority: 15 U.S.C. 632, 634(b)(6), 636(b), 637, and 662(5); and Public Law 105-135, sec 401, et. seq, 111 Stat. 2592.

In § 121.201, in the table “Small Business Size Standards by NAICS Industry,” under the heading Subsector 561—Administrative and Support Services, revise the entry for 561612 to read as follows:

§ 121.201

What size standards has SBA identified by North American Industry Classification System codes?

* * * * *

Small Business Size Standards by NAICS Industry

NAICS codes	NAICS U.S. industry title	Size standards in millions of dollars	Size standards in number of employees
*         *         *         *         *         *         *
Subsector 561 Administrative and Support Services
*         *         *         *         *         *         *
561612	Security Guards and Patrol Services	$17.0
*         *         *         *         *         *         *

* * * * *

Dated: June 23, 2006.

Hector V. Barreto,

Administrator.