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Panoptic Enterprises' FEDERAL CONTRACTS DISPATCH

DATE: January 23, 2002

SUBJECT: Small Business Administration; Inflation Adjustment to Size Standards for Service Industries

SOURCE: Federal Register, January 23, 2002, Vol. 67, No. 15, page 3041

AGENCIES: Small Business Administration (SBA)

ACTION: Interim Final Rule

SYNOPSIS: SBA is adjusting its monetary-based size standards (determined by receipts, net income, net worth, and assets) by 15.8% for the effect of inflation from 1994 (the last time the monetary-based size standards were adjusted). This change will restore eligibility to approximately 8,600 firms that have lost small business status solely due to the effect of inflation.

EDITOR'S NOTE: The SBA's regulations are in Title 13 of the Code of Federal Regulations (CFR). 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 North American Industry Classification System codes?

DATES: This interim final rule goes into effect February 22, 2002. This rule applies to solicitations issued on or after February 22, 2002, with one exception: for noncompetitive Section 8(a) contracts, the new size standards apply to offers of requirements that are accepted by SBA on or after February 22, 2002.

For purposes of eligibility for economic injury disaster loan (EIDL) assistance to small business concerns located in disaster areas declared as a result of the terrorist attacks on the World Trade Center, New York, NY and the Pentagon, the applicability date is September 11, 2001. This means SBA will go back and review applications for disaster recovery loans in those areas to determine whether those rejected because they did not qualify as small businesses are now eligible for assistance. (EDITOR'S NOTE: For more on the EIDL assistance program, see the October 22, 2001, FEDERAL CONTRACTS DISPATCH "Small Business Administration; Disaster Loan Program.")

Comments on the interim final rule must be received on or before February 22, 2002.

ADDRESSES: Send comments to Gary M. Jackson, Assistant Administrator for Size Standards, U.S. Small Business Administration, 409 Third Street, SW, Mail Code 6530, Washington, DC 20416; or by e-mail to SIZESTANDARDS@sba.gov.

FOR FURTHER INFORMATION CONTACT: Diane Heal, Office of Size Standards, 202-205-6618.

SUPPLEMENTAL INFORMATION: To maintain the value of small business size standards established in 1994, the SBA is increasing its monetary-based size standards by 15.8% to compensate for inflation between 1994 and the third quarter of 2001. "This change will restore eligibility to firms that may have lost small business status solely due to the effect of inflation," says SBA in its rule. SBA estimates that approximately 8,600 businesses will regain their small business status as a result of this change. Being considered a "small" business is helpful not only in obtaining small business set-aside contracts, but also for access to SBA loans, guarantees, and assistance.

Monetary-based small business size standards are determined by receipts, net income, or other monetary measures, and they apply primarily to service industries (small business size standards for manufacturing industries are primarily based on the number of employees, so those size standards are not affected by inflation). Most of the monetary-based size standards have been increased by 15.8%, then rounded to the nearest $500,000. For example, the size standard for North American Industrial Classification System (NAICS) 446130, Optical Goods Stores, had been $5 million. Multiplying $5 million by 115.8% equals $5.8 million, and rounding it to the nearest $500,000 produces a new small business size standard of $6 million. Some other examples are NAICS 812331, Linen Supply, increased from $10.5 million to $12 million; NAICS 541512, Computer Systems Design, increased from $18 million to $21 million; and NAICS 445110, Supermarkets, increased from $20 million to $23 million.

Not all monetary-based small business size standards were increased by 15.8%. For example, size standards for agricultural industries are set by law (see the June 7, 2001, FEDERAL CONTRACTS DISPATCH "Small Business Administration; Size Eligibility Requirements for Financial Assistance and Size Standards for Agriculture"). The health care size standards were increased in December 2000 (see the November 17, 2000, FEDERAL CONTRACTS DISPATCH "Small Business Administration (SBA); Small Business Size Standards for Health Care Industries"); the freight forwarders size standards were increased in September 2000 (see the August 9, 2000, FEDERAL CONTRACTS DISPATCH "Small Business Administration (SBA); Small Business Size Standards for Arrangement of Freight and Cargo Transportation"); and the help supply services, construction, and refuse collection size standards were increased in July 2000 (see the June 6, 2000, FEDERAL CONTRACTS DISPATCH "Small Business Administration (SBA); Small Business Size Standards for Help Supply Services", and the June 16, 2000, FEDERAL CONTRACTS DISPATCH "Small Business Administration (SBA); Small Business Size Standards for Construction and Garbage and Refuse Collection"). The size standards for all these industries (except those set by law and a few other special circumstances) were adjusted to account for inflation from the last time they were adjusted until the third quarter of 2001 -- for example, NAICS 562111, Solid Waste Collection, has been increased by 4.3% from $10 million to $10.5 million to adjust for inflation between the end of 1999 through the third quarter of 2001.

In addition, SBA is adding a paragraph (c) to 13 CFR 121.102, How does SBA establish size standards?, to state that SBA will examine the small business size standards at least once every five years to assess the affect of inflation. "If SBA finds that inflation has significantly eroded the value of the monetary-based size standards, it will issue a proposed rule to increase size standards," paragraph (c) states. Prior adjustments occurred in 1994, 1984, and 1975, and SBA believes that adjustments should be made more frequently than once every ten years or so.

FOR FURTHER INFORMATION CONTACT: Panoptic Enterprises at 703-451-5953 or by e-mail to Panoptic@FedGovContracts.com.

Copyright 2002 by Panoptic Enterprises. All Rights Reserved.

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