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Panoptic Enterprises' FEDERAL CONTRACTS DISPATCH

DATE: July 19, 2002

SUBJECT: Small Business Administration; Small Business Size Standard for Forest Fire Suppression and Fuels Management Services

SOURCE: Federal Register, July 19, 2002, Vol. 67, No. 139, page 47480

AGENCIES: Small Business Administration (SBA)

ACTION: Proposed Rule

SYNOPSIS: SBA is proposing to establish a $15,000,000 small business size standard for the forest fire suppression and fuels management activities classified within the "support activities for forestry" industry (North American Industry Classification System (NAICS) 115310). The current size standard for NAICS 115310 is $6,000,000.

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?

Effective February 22, 2002, the support activities for forestry size standard was increased from $5,000,000 to $6,000,000 as part of a 15.8% inflation adjustment to SBA's monetary size standards. For more on the adjustment, see the January 23, 2002, FEDERAL CONTRACTS DISPATCH "Small Business Administration; Inflation Adjustment to Size Standards for Service Industries."

DATES: Comments on the proposed size standard must be received on or before August 19, 2002.

ADDRESSES: Send comments to Gary M. Jackson, Assistant Administrator for Size Standards, 409 3rd Street, SW, Mail Code 6530, Washington, DC 20416; or e-mail to SIZESTANDARDS@sba.gov.

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

SUPPLEMENTAL INFORMATION: SBA has received requests from firms in the forestry industry to either increase the $6,000,000 size standard for the support activities for forestry industry, or create a separate size standard under this industry for forest fire suppression and fuels management services. These firms believe this is warranted because of increased emphasis by the federal government on removing biomass fuels from the nation's forests, the dramatic increase in funding for this effort, and the government's increasing reliance on the private sector to perform fuels management tasks and to suppress forest fires. Funding for these requirements increased from $500,000,000 in Fiscal Year 1999 to $1.9 billion in FY 2001 (FY 2002 spending is expected to reach $2.2 billion).

To meet the various fire suppression and fuels management requirements issued by the United States Forest Service (USFS) and Bureau of Land Management (BLM), firms need to invest in new capital equipment, such as fire engines, helicopters, brush cutters, and yarders. Also, the massive buildup of biomass fuels in the forest and severe droughts in the Southeast and West have resulted in devastating wildfires. USFS and BLM now rely heavily on contractors for fighting these fires, and plan on expanding their use of contractors. These agencies require contractors to provide specialized long-term (five to seven years) certifiable training to fire-crew chiefs and to crews, and to obtain USFS certification for fire-fighting equipment.

Besides the required investment in capital equipment and specially-trained personnel (which is quite expensive and must be recouped by the businesses), USFS and BLM have begun to include "prescribed burn" services in their fuels management requirements, generating additional revenues for the businesses.

All these factors have caused company revenues to dramatically increase over the last three years to the point where many of the 200 to 300 businesses involved in these activities exceed the current $6,000,000 size standard, causing the pool of eligible small businesses in this activity to seriously decline. Therefore, SBA is proposing a $15,000,000 small business size standard for forest fire suppression and fuels management separate from other forestry activities (which will remain at $6,000,000).

When determining a small business size standard, SBA evaluates five factors: (1) average firm size in the industry; (2) distribution of firms by size; (3) start-up costs; (4) competition within the industry; and (5) competition for federal procurements and SBA financial assistance (SBA's small business size standards methodology is in Standard Operating Procedure (SOP) 90 01 3, "Size Determination Program," which is available on SBA's website at http://www.sba.gov/library/soproom.html). Much of the information SBA evaluates comes from data collected by the Bureau of the Census. However, because forest fire suppression and fuels management activities only recently has generated significant private sector activity, the Census Bureau has not published information on firms engaged in these activities. So SBA conducted its own extensive review of the support activities for forestry industry and several other closely related forestry industries and concluded that $15,000,000 size standard, which is about half the $28,500,000 standard for NAICS Subsector 234, Heavy Construction (setting the size standard at $28,500,000 would make all but approximately 20 firms in the entire support activities for forestry industry small), but sufficiently above the $12,000,000 size standard for NAICS 235930, Excavation Contractors, to account for additional training and certification costs to businesses engaged in forest fire suppression and fuels management. Also evaluated was the 500 employee size standard for NAICS 113310, Logging, but almost all firms engaged in forest fires suppression and fuels management employ much fewer than 500 employees.

SBA believes the proposed $15,000,000 size standard will allow firms to an appropriate level without losing their small business status, but not to a level where a few firms would be able to control a significant portion of federal contracts at the expense of other small businesses. SBA estimates that approximately 50 to 60 firms will become eligible for SBA's financial assistance programs and federal procurement preference programs.

SBA is inviting public comments on the proposed $15,000,000 size standard. SBA is concerned with how the proposed size standard may negatively affect those qualified under the current size standards. Comments supporting an alternative to the proposal, including the option of retaining the size standards at $6 million, or changing the size standard to $28.5 million or 500 employees size standards should explain why the alternative would be preferable to the proposed size standard, and how the alternative affects current small businesses.

Since forest fire suppression and fuels management is a segment of the support activities for forestry industry, SBA would add a footnote to the size standards table defining the activities covered as follows: "Forest Fire Suppression and Fuels Management, a component of Support Activities for Forestry, includes establishments which provide services to fight forest fires. These firms usually have fire-fighting crews and equipment. This component also includes Fuels Management firms that provide services to clear land of hazardous materials that would fuel forest fires. The treatments used by these firms may include prescribed fire, mechanical removal, establishing fuel breaks, thinning, pruning, and piling." SBA is inviting comments on whether this definition inclusive of all activities currently performed in the industry.

If the proposed size standard is adopted, SBA will monitor Census Bureau data, as well as federal procurement and other industry data, to continue to assess the impact that this increased funding is having on the structure of small businesses in these activities, and to determine whether an adjustment needs to be made to the size standard.

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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