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Panoptic Enterprises' FEDERAL CONTRACTS DISPATCH

DATE: March 15, 2002

SUBJECT: Small Business Administration; Small Business Size Standard for Travel Agencies

SOURCE: Federal Register, March 15, 2002, Vol. 67, No. 51, pages 11873 and 11881

AGENCIES: Small Business Administration (SBA)

ACTION: Interim Final Rule and Proposed Rule

SYNOPSIS: SBA is increasing the small business size standard for travel agencies (North American Industry Classification System (NAICS) code 561510) from $1,000,000 to $3,000,000 for purposes of eligibility for economic injury disaster loan (EIDL) assistance attributed to the September 11, 2001, terrorist attacks on the World Trade Center and the Pentagon. In addition, SBA is proposing to increase, for all small business programs, the small business size standard for travel agencies from $1,000,000 to $3,000,000.

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?

The SBA's EIDL regulations are in 13 CFR Part 123, Disaster Loan Program.

For more on the EIDL regulations pertaining to the terrorist attacks on the World Trade Center and the Pentagon, see the October 22, 2001, FEDERAL CONTRACTS DISPATCH "Small Business Administration; Disaster Loan Program," and the January 15, 2002, FEDERAL CONTRACTS DISPATCH "Small Business Administration; Disaster Loan Program."

DATES: The increase in the travel agencies' size standard for EIDL purposes is effective March 14, 2002. Comments on the interim final rule must be received on or before April 15, 2002.

Comments on the proposed increase in the travel agencies' size standard for all small business programs must be received on or before April 15, 2002.

ADDRESSES: Comments on either the EIDL-related increase or the proposed increase must be sent to Gary M. Jackson, Assistant Administrator for Size Standards, 409 3rd 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: SBA has received requests from firms and trade associations in the travel industry to increase the $1 million size standard for travel agencies. These organizations believe this action is warranted because of the specialized equipment and systems required on federal and corporate travel services contracts and the consolidated and regional approach by federal agencies and large commercial clients in the performance of these contracts. In addition, the federal government and corporate client travel markets have changed, requiring specific equipment and systems. All these factors have raised the costs of doing business in the industry to the point that the pool of eligible small businesses performing government and corporate client travel services has seriously declined. Federal agencies are also concerned that the declining pool of eligible small businesses will result in fewer contracts with small travel agencies.

SBA agrees that recent changes in the travel agencies industry warrant a review of the size standard. After evaluating five factors, SBA has decided that a small business size standard of $3,000,000 is supportable because four out of the five factors support an increase: two factors support a size standard of approximately $3,000,000, and two factors support an increase to at least $2,000,000. An increase of the small business size standard to $3,000,000 would sufficiently increase the pool of small businesses that can meet the government's requirements. Therefore, SBA is proposing an increase to $3,000,000. (EDITOR'S NOTE: Effective February 22, 2002, SBA adjusted most of the service industry small business size standards by 15.8% (see the January 23, 2002, FEDERAL CONTRACTS DISPATCH "Small Business Administration; Inflation Adjustment to Size Standards for Service Industries"). However, the travel agencies industry size standard was not adjusted because SBA was already in the process of reevaluating the travel agencies size standard to reflect changing industry conditions.)

Also, SBA is issuing an interim final rule increasing the small business size standard for travel agencies to $3,000,000 for EIDL purposes only, and making the change retroactive to September 11, 2001. This change will provide much needed financial assistance to one of the industries that was hardest hit by the terrorist attacks by allowing more travel agencies to qualify for EIDLs. Because of the terrorist attacks, the traveling public cancelled and rescheduled existing travel arrangements and many postponed further travel. Consequently, airlines rescinded travel agencies' commissions on flights cancelled or rescheduled due to the terrorist attacks. As a result, many small travel agencies have seen their business decline by 20% to 50% since September 11, 2001.

In addition, SBA is changing the date as of which size status is determined for purposes of EIDL applications related to the terrorist attacks. Existing paragraph (c) of 13 CFR 121.302, When does SBA determine the size status of an applicant?, paragraph (b) of 13 CFR 123.300, Is my business eligible to apply for an economic injury disaster loan?, and paragraph (b) of 13 CFR 123.601, Is my business eligible to apply for an economic injury disaster loan under this subpart? require an applicant for an EIDL loan to be small as of the date the disaster commenced. However, for September 11 EIDL assistance, SBA is changing the date size status is "the date SBA accepts the application for processing."

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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