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Panoptic Enterprises' FEDERAL CONTRACTS DISPATCH

DATE: December 29, 2003

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

SOURCE: Federal Register, December 29, 2003, Vol. 68, No. 248, page 74842

AGENCIES: Small Business Administration (SBA)

ACTION: Final Rule

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

EDITOR'S NOTE: For more on the proposed rule, see the April 9, 2002, FEDERAL CONTRACTS DISPATCH "Small Business Administration; Small Business Size Standard for Testing Laboratories."

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?

A complete listing of current size standards is available at SBA's Size Standards website at http://www.sba.gov/size/sizetable2002.html, or by calling 202-205-6618 and requesting a copy of the table of size standards.

EFFECTIVE DATE: January 28, 2004.

FOR FURTHER INFORMATION CONTACT: Robert N. Ray, Office of Size Standards, 202-205-6618, e-mail: sizestandards@sba.gov.

SUPPLEMENTAL INFORMATION: Several testing laboratories requested that SBA review the $6 million small business size standard for NAICS 541380 because of the high level capacities and skills that federal are requiring their vendors that specialize in environmental and radiochemical testing to have. The laboratories claimed that these minimum requirements have raised the costs of doing business in this industry, and reduced the pool of eligible small testing laboratories capable of satisfying these requirements.

On April 9, 2002, SBA published a proposal to increase the small business size standard for NAICS 541380 from $6,000,000 to $10,000,000 in average annual receipts. The SBA received 35 comments on the proposed rule: 21 supported the proposed increase, and 14 opposed it.

Of those who supported the proposed increase, several cited increased government requirements for laboratory operations: reporting requirements, quality assurance plans, emergency contingency plans, analytical requirements, electronic data deliverable requirements, audit requirements, management costs, health and safety requirements, regulatory requirements and insurance and liability requirements. In addition, radioactive and non-radioactive hazards often required testing by environmental radiochemistry laboratories that have the licenses, procedures, insurance protection, and approvals for both types of hazardous samples. Because large capital and labor expenses are required for a testing laboratory to be active as a successful federal contractor, testing laboratories under $6 million in average annual receipts often cannot adequately perform federal contracts.

In addition, several commenters cited increasing consolidation in the industry as one or more large testing laboratories have acquired a number of smaller testing laboratories, while competing testing laboratories have gone out of business. These commenters claimed that this has resulted in greater concentration in the industry and less ability for small testing laboratories to compete for federal contracts.

Of those opposed to the proposed change, they argued there is a stagnant market for federal contracts and that increasing the size standard in such an environment would increase competition for federal contracts. This additional competition would have a negative impact on testing laboratories that are presently under the $6 million size standard.

Based on these comments, SBA is increasing the NAICS 541380 small business size standard from $6 million to $10 million, as proposed, by revising the entry in the small business size table in 13 CFR 121.201.

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

Copyright 2003 by Panoptic Enterprises. All Rights Reserved.

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