The U.S. Small Business Administration (SBA) published in the Federal Register two proposed rules to revise small business size standards in North American Industry Classification System (NAICS) Sectors 31-33 (Manufacturing) and industries with employee-based size standards that are not a part of NAICS Sectors 31-33, Sector 42 (Wholesale Trade), and Sectors 44-45 (Retail Trade). As part of its comprehensive size standards review required by the Small Business Jobs Act of 2010, the SBA evaluated employee-based size standards for all 364 industries in NAICS Sectors 31-33, and 57 industries and five exceptions that are not in NAICS Sectors 31-33, 42, or 44‑45 to determine whether they should be retained or revised.
Increases in Size Standards
The first rule proposes to increase size standards for 209 industries in Sectors 31-33. For instance, Burial Casket Manufacturing (NAICS 339995) and Dog and Cat Food Manufacturing (311111) size standards would increase from 500 to 1,000 (number of employees), and Frozen Specialty Food Manufacturing size standard would increase from 500 to 1,250 (number of employees). The SBA also proposes to increase the refining capacity component of the Petroleum Refiners (NAICS 324110) size standard from 125,000 to 200,000 barrels per calendar day total capacity for businesses that are primarily engaged in petroleum refining. The proposed rule also eliminates the requirement that 90 percent of a refiner’s output being delivered should be refined by the bidder.
Secondly, the SBA proposes to increase the employee-based size standards for 30 industries and three exceptions and decrease them for three industries that are not in Sectors 31-33, 42, or 44-45. Industry size standards that would increase include Crude Petroleum and Natural Gas Extraction (NAICS 211111), Deep Sea Passenger Transportation (NAICS 483112) and Book Publishers (NAICS 511130). Anthracite Mining (NAICS 212113), Silver Ore Mining (NAICES 212222) and Uranium-Radium-Vanadium Ore Mining (NAICS 212291) are the three industries whose standard size would decrease down to 250. SBA also proposes to eliminate the Information Technology Value Added Resellers sub-industry or “exception” under NAICS 541519 (Other Computer Related Services) and its 150-employee size standard because it has created inconsistencies, confusion and misuse. SBA also proposes to eliminate the Offshore Marine Air Transportation Services exception under NAICS 481211 and 481212 and Offshore Marine Services exception under NAICS Subsector 483 and their $28 million receipts based size standard and apply the applicable employee based size standards. Evaluations of data show almost no federal contract awards to small businesses under the $28 million size standard exception to NAICS 481211 and 481212. SBA believes that contracting officers strongly favor a relatively much larger 1,500- or 500-employee size standard instead of the $28 million receipts based size standard.
Businesses that Benefit
SBA estimates nearly 1,650 more firms will become small and eligible for federal procurement and SBA’s loan programs. Two groups of small businesses, in particular, will benefit from the proposed size standards revisions in this rule, if they are adopted as proposed: (1) some businesses that are above the current size standards may gain small business status under the higher size standards, thereby enabling them to participate in federal small business assistance programs; and (2) growing small businesses that are close to exceeding the current size standards will be able to retain their small business status under the higher size standards, thereby enabling them to continue their participation in the programs.
SBA also estimates that firms gaining small business status under the proposed size standards could receive federal contracts totaling $170 million to $175 million annually under SBA’s small business, 8(a), SDB, HUBZone, WOSB, EDWOSB, and SDVOSB Programs, and other unrestricted procurements. However, some businesses defined small under the current size standards may obtain fewer federal contracts due to the increased competition from more businesses defined as small under the proposed size standards. This transfer may be offset by a greater number of federal procurements set aside for all small businesses.
More Information
An SBA-issued White Paper entitled, “Size Standards Methodology,” which explains how SBA establishes, reviews and modifies its receipts-based and employee-based small business size standards, can be viewed at http://www.sba.gov/size. For more information about SBA’s revisions to its small business size standards for various industry sectors, click on “What’s New with Size Standards” on SBA’s website at http://www.sba.gov/size.
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