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Panoptic Enterprises' FEDERAL CONTRACTS DISPATCH

DATE: April 9, 2002

SUBJECT: Small Business Administration; Small Business Size Standard for Testing Laboratories

SOURCE: Federal Register, April 9, 2002, Vol. 67, No. 68, page 17020

AGENCIES: Small Business Administration (SBA)

ACTION: Proposed Rule

SYNOPSIS: SBA is proposing to modify the small business size standard for testing laboratories (North American Industry Classification System (NAICS) code 541380) to better define the size of businesses that should be eligible as small for federal procurement programs. SBA proposes to increase the size standard from $6,000,000 to $10,000,000 in average annual receipts.

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 testing laboratories 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 June 10, 2002. Comments supporting an alternative to the proposed size standard, including the option of retaining the current $6,000,000 size standard, should explain why the alternative would be preferable to the proposed size standard.

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: Robert N. Ray, Office of Size Standards, 202-205-6618.

SUPPLEMENTAL INFORMATION: The current small business size standard for North American Industry Classification System (NAICS) 541380, Testing Laboratories, is $6,000,000 in average annual receipts. SBA has received requests from testing laboratories to review the size standard because of the high level capacities and skills that federal agencies have recently required among their vendors that specialize in environmental and radiochemical testing, and the costs of doing business in this industry may have increased to the point that the pool of eligible small businesses has seriously declined.

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. The distribution of firms by size factor would support a size standard of nearly double the current $6,000,000. Three of the other four factors would support a size standard slightly above the $6,000,000 size standard. However, the competition within the industry factor does not support an increase because the industry is not dominated by large businesses. (EDITOR'S NOTE: 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.)

Based on the analysis of each evaluation factor, SBA is proposing a $10,000,000 size standard because four of the five evaluation factors clearly support a size standard ranging from slightly above the $6,000,000 size standard to double the size standard. SBA believes $10,000,000 is a reasonable size standard for the testing laboratories industry and will help small testing laboratories compete for federal contracts without including laboratories that are so large that they could harm the ability of small laboratories to compete successfully for federal contracts.

SBA estimates that 120 additional businesses out of 4,126 businesses in the industry would be considered small as a result of this increase, if adopted, and would become eligible for SBA's financial assistance programs and federal procurement preference programs. The number of small businesses would increase from 3,762 firms to 3,882.

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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