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Barry McVay's FEDERAL CONTRACTS DISPATCH

DATE: June 6, 2000

FROM: Barry McVay, CPCM

SUBJECT: Small Business Administration (SBA); Small Business Size Standards for Help Supply Services

SOURCE: Federal Register, June 6, 2000, Vol. 65, No. 109, page 35810

AGENCIES: Small Business Administration (SBA)

ACTION: Final Rule

SYNOPSIS: The SBA is increasing the small business size standard for Standard Industrial Classification (SIC) 7363, Help Supply Services (which consists of firms that provide office help supply services, temporary help services, labor pools, and manpower pools) from $5 million to $10 million in average annual receipts. In addition, SBA is clarifying language about affiliation when a Professional Employer Organization (PEO) is co-employer of a firm's employees.

EDITOR'S NOTE: The SBA's regulations are in Title 13 of the Code of Federal Regulations. The SBA small business size regulations are in Chapter 1, Small Business Administration; Part 121, Small Business Size Regulations; Subpart A, Size Eligibility Provisions and Standards; Section 121.201, What size standards has SBA identified by Standards Industrial Classification codes? The small business size standards, which were in Federal Acquisition Regulation (FAR) 19.102, Size Standards, until December 27, 1999, are published by the SBA on the Internet at http://www.sba.gov/regulations/siccodes.

EFFECTIVE DATE: July 6, 2000.

FOR FURTHER INFORMATION CONTACT: Patricia B. Holden, Office of Size Standards, 202-205-6618 or 202-205-6385.

SUPPLEMENTAL INFORMATION: On October 15, 1999, SBA proposed increasing the SIC 7363 size standard from $5 million to $10 million because of public concerns that the size standard has not kept pace with the rapid growth in the industry due to the trends of outsourcing and downsizing -- help supply firms are now larger and provide a wider range of personnel to businesses. SBA received six comments: four from individual firms (two were opposed, one agreed, and one was for a size standard of $20 million), one from an association representing 1,400 firms (the association supported the increase), and one from an SBA attorney. Based on the comments, SBA decided to increase the size standard to $10 million because the comments "did not provide us [SBA] with sufficient reasons to alter our assessment".

To make this change, SBA is revising the table in Section 121.201 so that "SIC 7363, Help Supply Services -- $10.0 million" is an exception under "Division I, Services -- $5.0 million."

In addition, SBA is clarifying paragraph (b)(4) of Section, 121.103, What is affiliation?, which specifically excludes business concerns that lease employees from the affiliation rules. SBA has decided to include "Professional Employee Organizations (PEOs)" in (b)(4) along with leasing companies because PEOs' relationship with the firms to whom they provide employees and staffing services are similar to that of leasing companies, but questions occasionally arise because PEOs were not specifically mentioned in the exclusion. The new paragraph read as follows (added language is in italics):

(b)(4) Business concerns that lease employees from concerns primarily engaged in leasing employees to other businesses or which enter into a co-employer arrangement with a Professional Employer Organization (PEO) are not affiliated with the leasing company or PEO solely on the basis of a leasing agreement.

EDITOR'S NOTE: On May 15, 2000, the SBA announced that it is replacing its SIC-based small business size standards with size standards based on the North American Industry Classification System (NAICS) effective October 1, 2000 (see the May 15, 2000, FEDERAL CONTRACTS DISPATCH "Small Business Administration (SBA); North American Industry Classification System (NAICS) Small Business Size Standards").

The Bureau of the Census maintains an NAICS web site at http://www.census.gov/epcd/www/naics.html. Available on the web site are tables cross-referencing SIC codes to the comparable NAICS codes (http://www.census.gov/epcd/naics/naicstb2.txt) and NAICS codes to the comparable SIC codes (http://www.census.gov/epcd/naics/naicstb1.txt).

The SIC codes to NAICS codes table shows that SIC 7363 has been split into two NAICS industries: 56132, Temporary Help Services, and 56133, Employee Leasing Services. The small business size standard for both these NAICS industries, according to the May 15 announcement, is $5 million. Therefore, SBA will have to amend its small business size standards for these two NAICS industries to $10 million.

FOR FURTHER INFORMATION CONTACT: Barry McVay at 703-451-5953 or by e-mail to BarryMcVay@FedGovContracts.com.

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