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Rule2023-02780

Small Business Size Standards: Manufacturing and Industries With Employee-Based Size Standards in Other Sectors Except Wholesale Trade and Retail Trade

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Published

February 15, 2023

Effective

March 17, 2023

Issuing agencies

Small Business Administration

Abstract

The U.S. Small Business Administration (SBA or the Agency) is increasing its employee-based small business size definitions (commonly referred to as "size standards") for North American Industry Classification System (NAICS) sectors related to Mining, Quarrying, and Oil and Gas Extraction (Sector 21); Utilities (Sector 22); Manufacturing (Sector 31-33); Transportation and Warehousing (Sector 48-49); Information (Section 51); Finance and Insurance (Sector 52); Professional, Scientific and Technical Services (Sector 54); and Administrative and Support, Waste Management and Remediation Services (Sector 56). Specifically, in terms of industries defined under the NAICS 2022 revision, SBA is increasing 144 and retaining 268 employee- based size standards in those sectors. SBA is also retaining the current 500-employee size standard for Federal procurement of supplies under the nonmanufacturer rule.

Full Text

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[Federal Register Volume 88, Number 31 (Wednesday, February 15, 2023)]
[Rules and Regulations]
[Pages 9970-10009]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-02780]

[[Page 9969]]

Vol. 88

Wednesday,

No. 31

February 15, 2023

Part II

Small Business Administration

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13 CFR Part 121

Small Business Size Standards: Manufacturing and Industries With
Employee-Based Size Standards in Other Sectors Except Wholesale Trade
and Retail Trade; Final Rule

Federal Register / Vol. 88 , No. 31 / Wednesday, February 15, 2023 /
Rules and Regulations

[[Page 9970]]

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SMALL BUSINESS ADMINISTRATION

13 CFR Part 121

RIN 3245-AH09

Small Business Size Standards: Manufacturing and Industries With
Employee-Based Size Standards in Other Sectors Except Wholesale Trade
and Retail Trade

AGENCY: U.S. Small Business Administration.

ACTION: Final rule.

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SUMMARY: The U.S. Small Business Administration (SBA or the Agency) is
increasing its employee-based small business size definitions (commonly
referred to as ``size standards'') for North American Industry
Classification System (NAICS) sectors related to Mining, Quarrying, and
Oil and Gas Extraction (Sector 21); Utilities (Sector 22);
Manufacturing (Sector 31-33); Transportation and Warehousing (Sector
48-49); Information (Section 51); Finance and Insurance (Sector 52);
Professional, Scientific and Technical Services (Sector 54); and
Administrative and Support, Waste Management and Remediation Services
(Sector 56). Specifically, in terms of industries defined under the
NAICS 2022 revision, SBA is increasing 144 and retaining 268 employee-
based size standards in those sectors. SBA is also retaining the
current 500-employee size standard for Federal procurement of supplies
under the nonmanufacturer rule.

DATES: This rule is effective March 17, 2023.

FOR FURTHER INFORMATION CONTACT: Samuel Castilla, Economist, Office of
Size Standards, (202) 205-6618 or <a href="/cdn-cgi/l/email-protection#7003190a150304111e1411021403300312115e171f06"><span class="__cf_email__" data-cfemail="4f3c26352a3c3b2e212b2e3d2b3c0f3c2d2e61282039">[email&#160;protected]</span></a>.

SUPPLEMENTARY INFORMATION:

Discussion of Size Standards

To determine eligibility for Federal small business assistance, SBA
establishes small business size definitions (usually referred to as
``size standards'') for private sector industries in the United States.
SBA uses two primary measures of business size for size standards
purposes: average annual receipts and average number of employees. SBA
uses financial assets for certain financial industries and refining
capacity, in addition to employees, for the petroleum refining industry
to measure business size. In addition, SBA's Small Business Investment
Company (SBIC), Certified Development Company (CDC/504), and 7(a) Loan
Programs use either the industry-based size standards or tangible net
worth and net income-based alternative size standards to determine
eligibility for those programs.
In September 2010, Congress passed the Small Business Jobs Act of
2010 (Pub. L. 111-240, 124 Stat. 2504, September 27, 2010) (``Jobs
Act''), requiring SBA to review all size standards every five years and
make necessary adjustments to reflect current industry and market
conditions. In accordance with the Jobs Act, in early 2016, SBA
completed the first five-year review of all size standards--except
those for agricultural enterprises for which size standards were
previously set by Congress--and made appropriate adjustments to size
standards for a number of industries to reflect current industry and
Federal market conditions. SBA also adjusts its monetary-based size
standards for inflation at least once every five years. An interim
final rule on SBA's latest inflation adjustment to size standards,
effective December 19, 2022, was published in the Federal Register on
November 17, 2022 (87 FR 69118). SBA also updates its size standards
every five years to adopt the Office of Management and Budget's (OMB)
quinquennial North American Industry Classification (NAICS) revisions
to its table of small business size standards. On December 21, 2021,
OMB published its ``Notice of NAICS 2022 Final Decisions . . .'' (86 FR
72277), accepting the Economic Classification Policy Committee (ECPC)
recommendations, as outlined in the July 2, 2021, Federal Register
notice (86 FR 35350), for ``the 2022 Revision to the North American
Industry Classification System (NAICS), . . . .'' On July 5, 2022, SBA
issued a proposed rule to adopt the OMB's NAICS 2022 revisions for its
table of size standards (87 FR 40034), which SBA finalized in September
2022 with an effective date of October 1, 2022 (87 FR 59240; September
29, 2022).
This final rule is part of a series of final rules that revised
size standards of industries grouped by various NAICS sectors. Rather
than revise all size standards at one time, SBA is revising size
standards by grouping industries within various NAICS sectors that use
the same size measure (i.e., employees or receipts). In the prior
review, SBA revised size standards mostly on a sector-by-sector basis.
As part of the second five-year review of size standards under the Jobs
Act, SBA has already issued five final rules reviewing all monetary-
based size standards and all employee-based size standards that are
part of the Wholesale Trade and Retail Trade sectors.\1\
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\1\ See Small Business Size Standards: Agriculture, Forestry,
Fishing and Hunting; Mining, Quarrying, and Oil and Gas Extraction;
Utilities; Construction (87 FR 18607; March 31, 2022), Small
Business Size Standards: Transportation and Warehousing;
Information; Finance and Insurance; Real Estate and Rental and
Leasing (87 FR 18627; March 31, 2022), Small Business Size
Standards: Professional, Scientific and Technical Services;
Management of Companies and Enterprises; Administrative and Support
and Waste Management and Remediation Services (87 FR 18665; March
31, 2022), Small Business Size Standards: Education Services; Health
Care and Social Assistance; Arts, Entertainment and Recreation;
Accommodation and Food Services; Other Services (87 FR 18646; March
31, 2022), and Small Business Size Standards: Wholesale Trade and
Retail Trade (87 FR 35869; June 14, 2022).
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To complete its second five-year review of size standards, SBA
reviewed size standards under Sector 31-33 and other sectors with
employee-based size standards not part of Wholesale and Retail Trade
sectors to determine whether the existing size standards should be
retained or revised based on the current industry and Federal market
data. After its review, SBA published in the April 26, 2022, issue of
the Federal Register (87 FR 24752) a proposed rule (``April 2022
proposed rule'') to increase the employee-based size standards for 150
industries or subindustries (or ``exceptions'') under NAICS 2017,
including 10 industries in NAICS Sector 21 (Mining, Quarrying, and Oil
and Gas Extraction), 10 industries in NAICS Sector 22 (Utilities), 120
industries in NAICS sector 31-33 (Manufacturing), five industries in
Sector 48-49 (Transportation and Warehousing), three industries in
Sector 51 (Information), one subindustry (``exception'') in Sector 54
(Professional, Scientific and Technical Services), and one subindustry
(``exception'') in Sector 56 (Administrative and Support, Waste
Management and Remediation Services). SBA also proposed to retain the
500-employee size standard under its nonmanufacturer rule.
In this final rule, SBA is adopting the proposed size standards
from the April 2022 proposed rule without change and applying the
adopted changes to the recently adopted NAICS 2022 structure following
the methodology outlined in the NAICS 2022 adoption final rule.
In conjunction with the current, second five-year comprehensive
size standards review, SBA developed a revised ``Size Standards
Methodology'' (Methodology) for developing, reviewing, and modifying
size standards, when necessary. SBA's revised Methodology provides a
detailed description of its analyses of various industry and program
factors

[[Page 9971]]

and data sources, and how the agency uses the results to establish and
revise size standards. In the proposed rule itself, SBA detailed how it
applied its revised Methodology to review and modify, where necessary,
the existing size standards for industries covered in this final rule.
Prior to finalizing the revised Methodology, SBA issued a notification
in the April 27, 2018, edition of the Federal Register (83 FR 18468) to
solicit comments from the public and notify stakeholders of the
proposed changes to the Methodology. SBA considered all public comments
in finalizing the revised Methodology. For a summary of comments and
SBA's responses, refer to the SBA's April 11, 2019, Federal Register
notification (84 FR 14587) of the issuance of the final revised
Methodology. SBA's Size Standard Methodology is available on its
website at <a href="http://www.sba.gov/size">www.sba.gov/size</a>.
In evaluating an industry's size standard, as described in its Size
Standards Methodology as well as in the April 2022 proposed rule, SBA
examines its characteristics (such as average firm size, startup costs
and entry barriers, industry competition and distribution of firms by
size) and the small business level and share of Federal contract
dollars in that industry. SBA also examines the potential impact a size
standard revision might have on its financial assistance programs, and
whether a business concern under a revised size standard would be
dominant in its industry. SBA analyzed the characteristics of each
employee-based industry in NAICS Sector 31-33 and other sectors with
employee-based size standards, mostly using a special tabulation
obtained from the U.S. Bureau of the Census from its 2012 Economic
Census (the latest available when the proposed rule was developed). The
2012 Economic Census special tabulation contains information for
different levels of NAICS categories on average and median firm size in
terms of both receipts and employment, total receipts generated by the
four and eight largest firms, the Herfindahl-Hirschman Index (HHI), the
Gini coefficient, and size distributions of firms by various receipts
and employment size groupings. To evaluate average asset size, SBA
combines the sales to total assets ratios by industry, obtained from
the Risk Management Association's (RMA) Annual eStatement Studies
(<a href="http://www.rmahq.org/estatement-studies/">http://www.rmahq.org/estatement-studies/</a>) with the simple average
receipts size by industry from the 2012 Economic Census tabulation to
estimate the average assets size for each industry. SBA also evaluated
the small business level and share of Federal contracts in each of the
industries using data from the Federal Procurement Data System--Next
Generation (FPDS-NG) for fiscal years 2016-2018. Table 4 of the April
2022 proposed rule, Size Standards Supported by Each Factor for Each
Industry (Employees), shows the results of analyses of industry and
Federal contracting factors for each industry and subindustry
(``exception'') covered by the proposed rule. Of the 427 industries and
5 subindustries (i.e., ``exceptions'') reviewed in the proposed rule,
the results from analyses of the latest available data on the five
primary factors discussed above supported increasing employee-based
size standards for 157 industries and 2 subindustries (``exceptions''),
decreasing size standards for 216 industries, and maintaining size
standards for 54 industries and 3 subindustries (``exceptions''). Table
1, Summary of Calculated Size Standards (NAICS 2017), below, summarizes
the analytical results from the April 2022 proposed rule by NAICS
sector.

Table 1--Summary of Calculated Size Standards
[NAICS 2017]
----------------------------------------------------------------------------------------------------------------
Number of size Number of size Number of size Number of size
NAICS sector NAICS sector standards standards standards standards
title reviewed increased decreased maintained
----------------------------------------------------------------------------------------------------------------
21............................ Mining, 24 15 9 0
Quarrying, and
Oil and Gas
Extraction.
22............................ Utilities....... 11 11 0 0
31-33......................... Manufacturing... 360 123 187 50
48-49......................... Transportation 15 5 8 2
and Warehousing.
51............................ Information..... 12 3 7 2
54............................ Professional, 7 1 3 3
Scientific and
Technical
Services.
Other......................... Agriculture, 3 1 2 0
Forestry,
Fishing and
Hunting (Sector
11); Finance
and Insurance
(Sector 52);
Administrative
and Support,
Waste
Management and
Remediation
Services
(Sector 56).
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Total..................... ................ 432 159 216 57
----------------------------------------------------------------------------------------------------------------

In the April 2022 proposed rule, SBA discussed the impacts of the
COVID-19 pandemic on small businesses and greater society. Recognizing
the wide-ranging economic impacts of the pandemic, SBA decided not to
lower any size standards for which the analysis suggested lowering
them. Instead, SBA proposed to maintain all size standards for
industries in which the analytical results supported a decrease or no
change to size standards and adopt all size standards for which the
analytical results supported an increase to size standards, except for
nine industries where SBA's evaluation of dominance in field of
operation indicated that size standards should be maintained at the
current levels to exclude dominant firms and one industry for which SBA
proposed to adopt a smaller increase to the size standard also to
exclude dominant firms.
In the April 2022 proposed rule, SBA also evaluated the 500-
employee size standard applicable to nonmanufacturers participating in
the Federal contracting market. SBA's regulations at 13 CFR 121.406
require small business concerns to meet certain requirements when they
offer to the Government an end item they did not manufacture, process,
or produce. These requirements are known as the nonmanufacturer rule.
To qualify for a Federal Government supply contract set aside for small
business, a nonmanufacturer must have an average of 500 or fewer
employees over the past 24 months, be primarily engaged in wholesale or
retail trade activities and supply the product of a U.S. small

[[Page 9972]]

manufacturer.\2\ In the proposed rule, SBA proposed to retain the 500-
employee size standard under the nonmanufacturer rule.
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\2\ On June 6, 2022, SBA issued a final rule implementing
section 863 of the National Defense Authorization Act for Fiscal
Year 2021, Public Law 116-283, which changed the averaging period
for calculating employees for SBA's employee-based size standards
from 12 months to 24 months (87 FR 34094).
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In the Request for Comments section of the proposed rule, SBA
requested comments on the appropriateness of the current 500-employee
size standard under the nonmanufacturer rule and suggestions for
alternative measures to an employee-based size standard that would be
more appropriate for size determination of nonmanufacturers.
SBA also sought comments on its proposal to increase size standards
for 150 industries and retain the current size standards for the
remaining 282 industries or subindustries (``exceptions'') in Sector
31-33 and other sectors with employee-based size standards (excluding
Wholesale Trade and Retail Trade Sectors). Specifically, SBA requested
comments on whether the proposed revisions are appropriate for the
industries covered by the proposed rule; whether the decision not to
lower any size standards is justified by considerations of impacts of
the COVID-19 pandemic; whether the equal weighting of individual
factors to derive an industry size standard is appropriate; and whether
the data sources used in developing proposed size standards were
appropriate or sufficient. SBA also sought comments on its evaluation
of specific industries or subindustries (``exceptions''), including the
Information Technology Value Added Resellers (ITVAR) exception to NAICS
541519 (Other Computer Related Services), NAICS 482111 (Line Haul
Railroads), NAICS 482112 (Short Line Railroads), the Environmental
Remediation Services (ERS) exception to NAICS 562910 (Remediation
Services), and certain industries for which SBA adjusted calculated
size standards based on its analysis of dominance in field of
operation.
To evaluate the impact of the changes to size standards adopted in
this final rule on the Federal contracting market and SBA's loan
programs, SBA analyzed FPDS-NG data for fiscal years 2018-2020 and
internal data on its guaranteed and disaster loan programs for fiscal
years 2018-2020. The results of this analysis can be found in the
Regulatory Impact Analysis section of this final rule.
In accordance with 13 CFR 121.102(e), SBA advises eligible parties
of the option to file a petition for reconsideration of a revised,
modified, or established size standard at SBA's Office of Hearings and
Appeals (OHA) within 30 calendar days after publication of this final
rule in accordance with 15 U.S.C. 632(a)(9) and 13 CFR 134 Subpart I.
OHA can be reached using the following contact information: by mail at
U.S. Small Business Administration, Office of Hearings and Appeals, 409
Third St. SW, Eighth Floor, Washington, DC 20416, by email at
<a href="/cdn-cgi/l/email-protection#c9a6a1a8afa0a5a0a7aeba89baaba8e7aea6bf"><span class="__cf_email__" data-cfemail="4e21262f2827222720293d0e3d2c2f60292138">[email&#160;protected]</span></a>, by phone at (202) 401-8200 TTY/TRS: 711, or by fax
at (202) 205-7059.

Discussion of Comments

SBA received a total of 49 comments on the proposed rule, 37 of
which pertained to SBA's proposal to increase the size standard for the
ERS exception to NAICS 562910 from 750 employees to 1,000 employees. Of
the 37 comments pertaining to the ERS exception, 28 opposed SBA's
proposed increase to the size standard and nine supported SBA's
proposal. SBA also received five comments pertaining to general size
standards issues, two comments that pertained to SBA's proposal to
retain the 500-employee size standard under its nonmanufacturer rule,
one comment on the ITVAR exception to NAICS 541519, one comment on
SBA's proposed size standards for power generation industries, one
comment on NAICS 315210 (Cut and Sew Apparel Contractors), one comment
on NAICS 333310 (Commercial and Service Industry Machinery
Manufacturing), and one comment that was outside the scope of the rule.
As mandated by section 1344 of the Jobs Act, SBA is required to
hold not less than two public forums during its quinquennial review of
size standards. SBA held two virtual public forums on size standards to
update the public on the status of the ongoing second five-year review
of size standards and to consider public testimony on changes contained
in the April 26, 2022, proposed rule. The two virtual public forums on
size standards were held on June 14, 2022, and on June 16, 2022. The
comments received during the virtual public forums are included in the
count of comments above. All comments to the proposed rule, including
those received as part of the virtual public forums, are available at
<a href="http://www.regulations.gov">www.regulations.gov</a> (RIN 3245-AH09) and are summarized and discussed by
topic below.

Comments Received During SBA's Virtual Public Forums on Size Standards

As explained in the Discussion of Comments section above, on June
14 and June 16, 2022, SBA held a series of two virtual public forums on
size standards to update the public on the status of the ongoing second
five-year review of size standards and to consider public testimony on
proposed changes contained in the April 26, 2022, proposed rule. Over
the course of the two days, of 87 total participants, SBA received
testimony from eight commenters, of which seven provided comments
pertaining to the SBA's proposal to increase the size standard for the
ERS exception from 750 employees to 1,000 employees and one provided
comments pertaining to SBA's increases to size standards generally. Of
the seven comments that pertained to the ERS exception, one commenter
expressed support for the SBA's proposed increase to the size standard
from 750 employees to 1,000 employees, while six commenters opposed the
proposed increase, asking for a lower size standard.
Regarding the public forum comments pertaining to the ERS
exception, one commenter supporting the SBA's proposed change expressed
that by raising the size standard to 1,000 employees, SBA will support
the creation of a healthy industrial base of ERS providers for Federal
clients and make it easier for small businesses to build the strength
and capabilities needed to grow and successfully graduate from small
business status. This commenter also urged SBA to consider adopting a
size standard of 1,200 employees based on SBA's analysis in the
proposed rule of all firms operating under the ERS exception regardless
of whether ERS was their primary business activity.
Commenters opposed to SBA's proposed increase to the size standard
for the ERS exception expressed that SBA's proposed change would
adversely impact smaller small businesses. One commenter also argued
that SBA's reliance on Federal contracting data for fiscal years 2016-
2018 led the Agency to make incorrect conclusions about industry trends
following SBA's prior increase to the ERS size standard from 500
employees to 750 employees, which resulted in SBA proposing a size
standard above what SBA's analysis would support if more recent data
were used. Specifically, the commenter pointed out that part of SBA's
rationale for increasing the size standard for the ERS

[[Page 9973]]

exception is to address the decline in small business participation
that occurred during fiscal years 2016-2018; however, the commenter
maintained that, based on the latest available data, small business
participation has increased significantly since that period. The
commenter further explained that one reason for the lag between SBA's
previous increase to the size standard for ERS and a corresponding
increase in small business participation in the Federal market could be
due to the nature of the Federal Government's procurement process in
general which in some cases could take months, if not years, to award
contracts due to protests, shifting agency priorities, funding levels,
and other issues. Moreover, this commenter raised concerns that the
Department of Energy's (DOE) reliance on management and operating (M&O)
contractors, of which most are large businesses, may have skewed SBA's
results. The commenter argued that if SBA excludes DOE's M&O contracts
under the ERS exception from its analysis of industry factors, small
business participation would be far more robust than what SBA reported
in the proposed rule.
Another commenter expressing similar concerns about SBA's use of
data from fiscal years 2016-2018 to measure small business
participation in the Federal market also urged SBA to consider startup
costs in its analysis of the industry size standard and utilize more
recent data from the Engineering News-Record (ENR) (an industry trade
publication) of the top 200 ENR firms in the industry when describing
the economic characteristics of ERS firms. Another commenter urged SBA
to consider the Environmental Protection Agency's (EPA) Region 2
Superfund program as a representation of the NAICS 562910 remediation
industry. The commenter argued that these program data demonstrate the
ability of firms well under the current 750-employee size standard to
fulfill the Federal Government's small business remediation
requirements; thus, it is unnecessary for SBA to increase the size
standard beyond the current threshold as the added competition from
larger firms could impact the number of opportunities available for
smaller small firms that are already thriving under the current 750-
employee size standard. SBA received three comments expressing
agreement with this commenter, specifically in support of the notion
that the current size standard of 750 employees is already appropriate.
Besides comments pertaining to the ERS exception, during the public
forums on size standards, SBA also received one comment from a business
operating under NAICS 561110 (Office of Administrative Services)
pertaining to SBA's review of size standards generally. The commenter
opposed any increases to size standards at this time, citing concerns
about an impending economic recession, category management impacts, and
best-in-class requirements, which together, reduce small business
opportunities and eventually the total number of small businesses
participating in the Federal market. The commenter urged SBA to help
small businesses facing these concerns by improving its engagement
efforts through increased access to financial assistance and other
support rather than increasing size standards.
The comments received during the virtual public forums that pertain
to the ERS exception closely mirror the public submissions received
electronically through the <a href="http://www.regulations.gov">www.regulations.gov</a> portal. In fact, many
commenters at the virtual public forums also submitted more detailed
comments in writing, elaborating on their oral testimony. Thus, SBA is
addressing these comments as part of its summary and response to
comments under the Comments to the Exception to NAICS 562910
(Environmental Remediation Services) section of this final rule.
Similarly, SBA responds to the comment opposing increases to size
standards generally as part of its summary and response to comments
under the General Comments on SBA's Proposed Changes to Size Standards
section of this final rule.

Comments on SBA's Proposed Changes to Power Generation Industries

SBA received one comment from a national trade association
representing nearly 900 local electric cooperatives and other rural
electric utilities supporting SBA's proposed changes to size standards
for industries under NAICS Sector 22 (Utilities). Specifically, the
association agreed with SBA's decision to maintain the current size
standard for NAICS 221116 and adopt adjusted calculated increases to
size standards for NAICS 221111, 221112, 221113, 221114, 221115,
221116, 221117, 221118, and 221210 based on SBA's analysis of dominance
in field of operation.

SBA Response

SBA appreciates the association's comments supporting SBA's
proposed size standards for several select industries under Sector 22,
Utilities. SBA agrees that the proposed size standards are appropriate
in terms of industry market conditions in those industries and believes
that the changes will ensure access to SBA's programs for the intended
beneficiaries within these industries while excluding the largest and
potentially dominant firms from being considered small. Thus, in the
absence of opposing comments, SBA is adopting the proposed size
standards for Sector 22 industries, as proposed.

Comments on the Federal Procurement Size Standard for Nonmanufacturers

SBA received one comment, expressing support for SBA's proposal to
maintain the current 500-employee size standard for nonmanufacturers.
The commenter expressed concern that if SBA were to adopt a receipt-
based size standard, as explored by SBA in the proposed rule, thousands
of firms that currently qualify as small under the 500-employee
nonmanufacturer size standard would lose their eligibility to seek set-
aside procurements for small businesses. The commenter further
explained that a receipts-based size standard would likely limit sales
volume for most resellers while also impacting their ability to
maintain satisfactory employment levels. Thus, the commenter urged SBA
to retain the current 500-employee size standard for nonmanufacturer
resellers.
SBA also received one comment opposing SBA's proposal to maintain
the current 500-employee size standard for nonmanufacturers. The
commenter believed that SBA provided an insufficient and non-compelling
rationale for not adopting the calculated size standard of 550
employees for nonmanufacturers, and instead proposing to maintain the
current 500-employee size standard. Specifically, the commenter
expressed that SBA's rationale to maintain the size standard simply
because it is familiar to the industry and working well in practice
sets a bad and arbitrary precedent. Thus, the commenter urged SBA to
follow the results of its analysis and increase the size standard for
nonmanufacturers to 550 employees, as suggested by the results. This
commenter also expressed support for maintaining an employee-based size
standard for nonmanufacturers rather than adopting a receipts-based
size standard.

SBA Response

SBA agrees with commenters that an employee-based size standard is
most appropriate for nonmanufacturers. In the proposed rule, as an
alternative, SBA calculated a receipts-based size standard of $27
million for nonmanufacturers. However, although SBA evaluated a
receipt-based size standard for nonmanufacturers, SBA

[[Page 9974]]

believes that adopting a receipts-based size standard, instead of an
employee-based size standard, would be inappropriate for several
reasons. Specifically, the Small Business Act provides that the size of
manufacturing firms be based on the number of employees and that the
size of services firms be based on average annual receipts. Adopting a
receipts-based size standard under the nonmanufacturer rule, which
currently applies only to Government acquisitions for supplies, would
cause many manufacturing concerns supplying products to the Government
as nonmanufacturers under the nonmanufacturer rule to be evaluated
under a receipts-based size standard, which would be contrary to the
requirements of the Small Business Act. Moreover, based on data from
the 2017 Economic Census, SBA determined that under the calculated $27
million receipts-based size standard, more than 35,000 firms would lose
their small business status they currently enjoy under the 500-employee
nonmanufacturer size standard. Thus, as proposed, SBA is maintaining an
employee-based size standard for nonmanufacturers.
With respect to the comment petitioning SBA to adopt 550 employees
as the size standard for nonmanufacturers as suggested by SBA's
analytical results, SBA disagrees that its rationale for maintaining
the 500-employee size standard is arbitrary. As explained in the
proposed rule, the analytical results support raising the size standard
for nonmanufacturers from 500 employees to 550 employees. However, to
maintain continuity with general public familiarity with and long
acceptability of the 500-employee nonmanufacturer size standard, SBA
proposed to maintain the current 500-employee size standard. In the
proposed rule, SBA clarified why it believed that the 500-employee size
standard is appropriate and working well for the majority of firms to
which it applies, explaining that the 500-employee size standard for
nonmanufacturers is also the most common size standard among the
manufacturing industries (NAICS Sector 31-33) where some manufacturers
bid on supply contracts under which they do not propose to produce the
particular product to be supplied with their own labor force,
notwithstanding that they are capable of doing so, and therefore must
qualify as small businesses under the nonmanufacturer rule. Thus, SBA
believes that maintaining 500 employees as the size standard for
nonmanufacturers would promote consistency in its regulations and
increase compliance. Therefore, in an effort to minimize the adverse
consequences on manufacturers who may provide supplies to the Federal
Government as nonmanufacturers under the nonmanufacturer rule, and to
promote fair competition among manufacturers and nonmanufacturers, SBA
is adopting the predominant 500-employee size standard for
manufacturers as the size standard for nonmanufacturers who desire to
bid on Federal supply contracts.

Comments on the Application of the Nonmanufacturer Rule to Information
Technology Value Added Resellers (ITVARs)

SBA received one comment urging SBA to reconsider whether the
nonmanufacturer rule should apply to the ITVAR exception to NAICS
541519 (Other Computer Related Services). The commenter expressed that
it may be inconsistent for SBA to apply the nonmanufacturer rule to the
ITVAR exception when most or all of the supplies provided by resellers
under this exception would fall under one of the NAICS codes for which
class waivers currently exist.

SBA Response

As stated in Footnote 18 to SBA's table of size standards at 13 CFR
121.201, for a Federal contract to be classified under the ITVAR
exception and its 150-employee size standard, it must consist of at
least 15 percent, but not more than 50 percent of value-added services.
In addition, the offeror must comply with the manufacturing performance
requirements, or comply with the nonmanufacturer rule by supplying the
products of small business concerns, unless SBA has issued a class or
contract specific (individual) waiver of the nonmanufacturer rule.
While SBA agrees with the commenter that class waivers may already
exist for some IT products commonly purchased using the ITVAR
exception, SBA also acknowledges that not all IT products procured
through the ITVAR exception have a waiver of its nonmanufacturer rule.
Moreover, considering the rapid pace of development in the IT industry,
SBA believes that it is not unreasonable to assume that there will be
new products purchased by the Federal Government using the ITVAR
exception in the future that likewise do not qualify for a waiver.
Thus, by eliminating the nonmanufacturer rule for the exception, SBA
could disadvantage small firms who are currently offering, or plan to
offer products not subject to a class waiver.
SBA also believes it would be inconsistent with the intent of the
Small Business Act if ITVAR resellers could provide the supplies
produced primarily by a large original equipment manufacturer (OEM), or
other large manufacturers, without a waiver of the nonmanufacturer
rule. SBA is concerned that without the compliance with the
nonmanufacturer rule, the ITVAR exception may allow small IT resellers
to simply serve as ``pass throughs'' for large OEMs and other large
manufacturers. While SBA recognizes that the nonmanufacturer rule may
work better for some products than for others, it strongly believes
that the rule must apply to all supply contracts equally. Thus, like
all other products and supplies, the nonmanufacturer rule must also
apply to IT products, including those purchased through the ITVAR
exception. Therefore, SBA is retaining the requirement that the supply
component of small business set-aside ITVAR contracts must comply with
the manufacturing performance requirements or the SBA's nonmanufacturer
rule.

Comments on NAICS 315210 (Cut and Sew Apparel Contractors)

SBA received one comment petitioning SBA to increase the size
standard for NAICS 315210 (Cut and Sew Apparel Contractors) from 750
employees to 1,500 employees. The commenter maintained that the
manufacture of personal protection equipment (PPE) by Cut and Sew
Apparel Contractors and the reliance of the Federal Government on this
industry to satisfy strategic objectives related to sourcing PPE
equipment and supplies domestically suggests that the threshold should
be larger than 750 employees. Elaborating on this idea, the commenter
explained that increasing the size standard would allow PPE
manufacturers to sufficiently scale up their operations to meet the
Federal Government's demand at lower costs. Moreover, the commenter
presented data to show the high fixed costs of production and relative
labor intensity of Cut and Sew Apparel Contractors relative to other
manufacturing industries, which the commenter believed justified an
increase to the size standard when considering the strategic importance
of firms within the Cut and Sew Apparel Contractor industry. The
commenter also argued that, due to the pandemic, the distribution of
goods being produced by Cut and Sew Apparel Contractors has changed,
and as a result,

[[Page 9975]]

these companies must invest significantly more in property, plant, and
equipment if they are to become more cost-efficient producers of PPE.
The commenter explained that in order to meet the Federal Government's
demands for quality and quantity of goods for PPE purchases, companies
must be larger, both in terms of capital investment and employment
size. However, the commenter did not provide any data on industry and
Federal contracting factors showing why the size standard for the Cut
and Sew Apparel Contractor industry should be increased from 750
employees to 1,500 employees.

SBA Response

SBA disagrees with the commenter's argument that SBA should
increase the size standard for NAICS 315210 based on the industry's
importance to Government purchases of PPE. Specifically, SBA believes
that the commenter may have mis-identified the proper NAICS code for
which Government purchases of PPE normally fall under. Based on the
NAICS manual, available at <a href="http://www.census.gov/naics">www.census.gov/naics</a>, NAICS 315210 comprises
firms that are commonly referred to as contractors that are primarily
engaged in (1) cutting materials owned by others for apparel and
accessories and/or (2) sewing materials owned by others for apparel and
accessories. Normally, Federal Government purchases of PPE do not fall
under this NAICS code as Government purchases of PPE are normally to
acquire new materials and equipment, and not to modify materials and
equipment already owned by the Federal Government. Instead, Government
purchases of PPE usually fall under NAICS 339112 (Surgical and Medical
Instrument Manufacturing), NAICS 339113 (Surgical Appliance and
Supplies Manufacturing), or NAICS 423450 (Medical, Dental, and Hospital
Equipment and Supplies Merchant Wholesalers) \3\ with Product Service
Code (PSC) 6515 (Medical and Surgical Instruments, Equipment, and
Supplies). Based on an analysis of FPDS-NG data for fiscal years 2018-
2020, SBA found that less than 0.1 percent of Government purchases
under PSC 6515 fall under NAICS 315210 while nearly 80 percent of
Government purchases under PSC 6515 occur under one of the three
aforementioned NAICS codes. Since PSC 6515 includes a broad range of
supplies, SBA also analyzed the data by keywords to identify contracts
for PPE, including respirators, masks, surgical gowns, and other PPE.
SBA again found that NAICS 315210 was insignificant in terms of the
total dollars obligated towards purchases of these PPE items. Thus, SBA
does not agree that the industry's importance to Federal Government
purchases of PPE warrants an increase to the size standard in NAICS
315210 in order to enable the industry to meet greater demand for PPE.
---------------------------------------------------------------------------

\3\ Per the requirements at 13 CFR 121.402(b)(2), acquisitions
for supplies must be classified under the appropriate manufacturing
or supply NAICS code, not under a Wholesale Trade or Retail Trade
NAICS code, however, FPDS-NG data shows that some contracting
activity may be misclassified under these NAICS codes.
---------------------------------------------------------------------------

Moreover, SBA's analysis of industry factors, as presented in Table
4 of the April 2022 proposed rule, supported a calculated size standard
of only 450 employees for NAICS 315210. However, in response to the
economic challenges presented by the COVID-19 pandemic and the measures
taken by Federal Government to protect public health, SBA decided to
adopt a policy to not lower size standards during the ongoing second
five-year review of size standards in order to reduce the economic
impacts to small businesses. Thus, SBA proposed to retain the current
size standard for NAICS 315210 at 750 employees even though the data
supported 450 employees. Based on the 2017 Economic Census data, 99.8
percent of firms are already small under the current 750-employee size
standard for NAICS 315210. Increasing the size standard to 1,500
employees might include the largest and potentially dominant firms as
small, which would run counter to the Small Business Act requirement
that the size standards must exclude dominant firms from being
qualified as small.
Regarding the industries that most accurately classify purchases of
PPE, namely NAICS 339112 and NAICS 339113, SBA has proposed to retain
the current size standard for NAICS 339112 at 1,000 employees and
increase the size standard for NAICS 339113 to 800 employees based on
the analysis of industry and Federal contracting factors. While the
commenter submitted data on the costs of employment for firms operating
under NAICS 315210 relative to other manufacturing industries, the
provided data are not at the 6-digit industry level and do not
demonstrate that SBA's analysis of NAICS 339112 and 339113 is
insufficient. Thus, for the above reasons, SBA is not adopting the
commenter's recommendation to increase the size standard for NAICS
315210 from 750 employees to 1,500 employees, nor is SBA adopting 1,500
employees as the size standard for other three NAICS codes under which
solicitations for PPE are normally categorized.

Comments on the Exception to NAICS 562910 (Environmental Remediation
Services)

As explained above in the Discussion of Comments section of this
final rule, SBA received a total of 37 comments pertaining to SBA's
proposal to increase the size standard for the Environmental
Remediation Services (ERS) exception to NAICS 562910 from 750 employees
to 1,000 employees. Of the 37 comments pertaining to the ERS exception,
28 (including six comments opposing SBA's proposal received during
SBA's virtual public forums on size standards) opposed SBA's proposed
increase and nine (including one comment supporting SBA's proposal
during the virtual public forums) supported SBA's proposal. Below, SBA
summarizes and responds to comments supporting the SBA's proposed
change to the ERS size standard, then summarizes and responds to
comments opposing the SBA's proposed change.

Comments Supporting SBA's Proposed Change to the ERS Exception

A total of nine comments were received supporting SBA's proposal to
increase the size standard for the ERS exception from 750 employees to
1,000 employees. One commenter supporting SBA's proposed increase to
the size standard argued that SBA's current 750-employee size standard
is too restrictive and has been a detriment to many companies in the
industry. The commenter expressed that adopting a 1,000-employee size
standard would remove the restraint and allow for further growth for
companies without forcing them to prematurely graduate from the small
business status and to compete with larger firms with more resources
when they exceed the size standard.
An additional four commenters, submitting nearly identical
comments, supported SBA's proposed increase to the ERS size standard
for similar reasons, expressing that SBA's proposed increase would
allow additional firms to participate in Federal contracting as small
businesses, increase small business competition, and ultimately reverse
the downward trend in small business share of ERS contract dollars from
fiscal years 2013 to 2018. These commenters further expressed that
their business would benefit from SBA's proposed change due to the
increased capabilities they could achieve under a larger size standard
which would allow them to take on larger and more complex remediation
projects. One

[[Page 9976]]

commenter also supported SBA's proposal based on the belief that the
Federal Government will have access to an expanded pool of more capable
small businesses to meet the demand for the surge in ERS requirements
expected as part of the implementation of the Infrastructure Investment
and Jobs Act (Pub. L. 117-58, November 15, 2021). Three commenters
petitioned SBA to increase the size standard for the ERS exception to
1,200 employees based on SBA's analysis in the proposed rule which
showed support for a size standard as high as 1,200 employees when
including data from the largest firms whose principal business
activities were generally unrelated to ERS.
Referring to an opposing comment received during SBA's virtual
public forums on size standards that urged SBA to exclude the
Department of Energy (DOE) contracts from its analysis of the ERS
exception due to DOE's unique reliance on large M&O contractors, one
commenter expressed that the notion of excluding such procurements,
which are often related to nuclear remediation, is in direct
contradiction to the definition of the ERS subindustry, as stated in
Footnote 14 of SBA's Table of Size Standards at 13 CFR 121.201. The
commenter explained that this footnote specifically lists nuclear
remediation as an eligible activity and further argued that the
justification for excluding DOE contracts from the analysis simply
because they are dominated by large businesses is not sufficient. This
commenter also opposed using the Engineering News-Record (ENR) top 200
environmental firms list as a source of industry data for evaluation of
the ERS size standard as suggested by one commenter at the virtual
public forums, because the data do not cover the whole industry and may
contain subjective measures of revenue that do not comport with SBA's
definitions.

SBA Response

SBA agrees with commenters supporting SBA's proposed increase to
the size standard for the ERS exception that adopting a size standard
of 1,000 employees would extend the runway for firms to grow while
still allowing access to SBA's contracting and financial assistance
programs. SBA also believes that increasing the size standard to 1,000
employees would improve competition in the industry and help small
businesses to earn more Federal contracting dollars and compete for
more complex environmental remediation projects, including those that
may become newly available as a result of the Infrastructure Investment
and Jobs Act.
As explained in the proposed rule, the procurement data analyzed by
SBA showed that the dollars awarded by firms' employment size were
concentrated among the largest firms. Specifically, small firms with
less than or equal to 750 employees received about 37 percent of the
total ERS dollar awards during fiscal years 2016-2018, while firms with
more than 5,000 employees accounted for about 60 percent of the total
ERS contract awards, with two firms alone accounting for almost 40
percent of the total awards under ERS activities. Firms between 750
employees and 5,000 employees accounted for 3.5 percent of the total
ERS contract dollars. Procurement data from FPDS-NG for fiscal years
2019-2021 analyzed by SBA showed an increase in the small business
share of ERS contract dollars to 43.5 percent and a decrease in the
share of the largest firms (i.e., those with more than 5,000 employees)
to 54 percent, with two of them alone accounting for about 34 percent
of total ERS dollars during that period. Firms between 750 employees
and 5,000 employees accounted for remaining 2.5 percent. While the
small business share of ERS contract dollars increased from about 37
percent during fiscal years 2016-2018 to about 43.5 percent during
fiscal years 2019-2021, this is still smaller than the corresponding
share of about 50 percent during fiscal years 2013-2015.
Thus, SBA believes that the large skewness in the distribution of
ERS firms by the number of employees, the large percentage of ERS
contracting dollars being concentrated among very large firms, a
decrease in the small business share of total ERS awards compared with
fiscal years 2013-2015, and the analysis of industry factors according
to the SBA's Size Standards Methodology outlined in the proposed rule
support SBA's proposal to increase the ERS size standard to 1,000
employees. SBA believes that its proposal to increase the size standard
to 1,000 employees will further increase small business participation
in the industry over time.
Regarding the adoption of a higher calculated size standard of
1,200 employees for the ERS industry, SBA does not believe that the
calculated size standard of 1,200 employees accurately reflects the
economic characteristics of firms primarily engaged in the business
activities related to the ERS exception since this calculation was
based on untrimmed data, and thus, included very large firms whose
primary activity was likely unrelated to the ERS exception. Moreover,
in response to comments pertaining to using the ENR data on the top 200
environmental firms, SBA agrees with commenters supporting SBA's
increase to the ERS size standard that this dataset is not
comprehensive enough for SBA's size standards purposes. For example,
SBA's analysis of the ERS industry included 974 firms participating in
Federal contracting under the exception to NAICS 562910 during fiscal
years 2019-2021, while the ENR dataset suggested by the commenters only
includes the top 200 environmental firms.\4\ In order to reliably
evaluate the size standard of any industry, SBA must rely on
comprehensive data that is representative of the economic trends of the
entire industry, rather than only the top firms.
---------------------------------------------------------------------------

\4\ 974 is the number of firms after the removal of entities
with null revenue and null number of employees as well as the
identified Government entities and manufacturing firms. This number
is the total entities participating in the ERS activity before
trimming the data.
---------------------------------------------------------------------------

Comments Opposing SBA's Proposed Change to the ERS Exception

Of the 28 comments opposing SBA's proposed change to the size
standard for the ERS exception, 27 comments expressed similar arguments
for why SBA should retain the current 750-employee size standard for
the ERS exception, including 21 comments submitted through the
<a href="http://regulations.gov">regulations.gov</a> rulemaking portal, of which 20 were nearly identical,
and six comments submitted orally through SBA's Virtual Public Forum on
Size Standards. Many of these 27 commenters, including the 20
commenters that submitted nearly identical comments, and at least two
commenters at SBA's Virtual Public Forum on Size Standards were part of
a group of firms using data from FEDMINE, a business intelligence
provider specializing in Federal Government contracting, as the basis
for their comments. One commenter whose comment was also based on the
FEDMINE report provided a list of 52 other firms that endorsed their
comment. The remaining commenters that did not reference FEDMINE data
provided similar reasons as those outlined by commenters using FEDMINE
data for opposing SBA's proposed increase to the ERS size standard.
One commenter opposed to SBA's proposed size standard increase for
the ERS exception raised issues other than those identified by the
above 27 commenters, including establishing a separate NAICS industry
specifically for munitions and unexploded ordnance

[[Page 9977]]

services. Below, SBA summarizes and responds to these opposing comments
separately.

Comments Opposing SBA's Proposed Change to the ERS Exception for
Similar Reasons

SBA received 27 comments petitioning SBA to retain the current 750-
employee size standard for the ERS exception based on similar
arguments, including six comments received during the virtual public
forums on size standards and 21 comments received through the
<a href="http://www.regulations.gov">www.regulations.gov</a> rulemaking portal of which 20 were almost
identical. The commenters commissioned FEDMINE, a business intelligence
provider specializing in Federal Government contracting, to prepare a
report on their behalf regarding Federal spending under the ERS
exception for fiscal years 2016-2021.
The commenters objected to SBA's proposed increase to the ERS size
standard on the grounds that more recent data shows that SBA's
calculation of the small business share of the Federal market under
NAICS 562910 is understated, and therefore, undermines SBA's
justification for increasing the size standard in order to help small
businesses better compete for contracting opportunities. Specifically,
according to the commenters' analysis, the amount of Federal dollars
awarded to small businesses under the ERS exception increased nearly 50
percent, from about $1.4 billion in 2016 to about $2.1 billion in 2021.
The commenters also provided data showing that the small business share
of the ERS Federal spend increased from 35 percent in 2018 to 46
percent in 2021. The commenters argued that increasing the share of ERS
Federal dollars obligated to small firms demonstrates, contrary to
SBA's analysis, that the prior increase in the size standard for the
exception from 500 employees to 750 employees was effective in
increasing competition in the Federal market under the ERS exception
(81 FR 4436 (January 26, 2016)). The commenters contended that SBA
should evaluate data beyond fiscal year 2018 for purposes of analyzing
the ERS exception because most Federal dollar obligations under the
exception are awarded under indefinite delivery contracts (IDCs), and
as such, SBA should recognize that there was a lapse of time between
when the ERS size standard was increased in 2016 until IDCs were
awarded and significant dollars were obligated to small businesses
under the new size standard.
These commenters also maintained that the DOE's unique procurement
methods, including the Agency's reliance on management and operating
(M&O) contracts which are typically awarded to large firms, have a
significant influence on SBA's calculations due to DOE's high
proportion of total dollars obligated under the ERS exception. Thus,
commenters urged SBA to exclude DOE contracts from the analysis since
they do not accurately reflect market conditions outside of the DOE.
Regarding the influence of DOE's procurement trends on SBA's
calculations, the commenters presented data showing the percent of
DOE's ERS contracts dollars obligated to small businesses and the
proportion of total ERS awards attributable to the DOE. The data
submitted by commenters showed that for fiscal years 2016-2021, on
average, DOE awarded only about seven percent of ERS contracting
dollars to small businesses while comprising nearly 50 percent of total
Federal ERS spending. The commenters maintained that unlike other
Federal agencies, DOE awards nearly all ERS work through its M&O
contractors, which are exclusively large businesses. For example, the
commenters added, in fiscal year 2021, of the $1.2 billion that DOE
awarded under the exception, only $3.2 million (0.3%) was awarded to
non-M&O contracts. Subtracting the large business M&O dollars from the
DOE's total ERS dollars, the commenters found that the small business
share of total dollars was 97.8 percent. The commenters also argued
that since most M&O contractors are joint ventures between two or more
large businesses, each with employee counts far in excess of the SBA's
size threshold, no reasonable increase in the ERS size standard would
influence the ability of small businesses to compete at the prime level
in the DOE M&O market and that the contracting dollars awarded to small
business is not likely to increase simply because the number of
businesses considered small under the exception has grown.
Regarding the dollars obligated to small businesses outside of DOE,
the commenters presented data showing that since fiscal year 2016, the
share of non-DOE ERS contract dollars awarded to small businesses
increased from an average of 53 percent in fiscal years 2013-2015 to an
average of 63 percent in fiscal years 2016-2018, and to an average of
78 percent in fiscal years 2019-2021.
Moreover, the commenters expressed concern with SBA's impact
analysis which showed that two additional small businesses would gain
access to small business set aside opportunities under the proposed
1,000-employee size standard for the ERS exception. Specifically, the
commenters expressed that these newly eligible firms may adversely
impact smaller small businesses competing for Federal contracts under
the exception. The commenters argued that the addition of larger and
more experienced firms may take away future opportunities from
currently small firms that are adequately meeting small business
procurement needs of Federal agencies.
During SBA's virtual public forums on size standards, SBA received
comments expressing similar concerns as those outlined above regarding
SBA's use of data from fiscal years 2016-2018 to measure small business
participation in the Federal ERS market. One commenter also urged SBA
to consider startup costs in its analysis of the industry size standard
and utilize more recent data from the ENR, an industry trade
publication, which describes the economic characteristics and primary
business activities of the top 200 engineering/environmental firms in
the industry down to the subsector level. Another commenter urged SBA
to consider Environmental Protection Agency's (EPA) Region 2 Superfund
program as a representation of the ERS industry. The commenter argued
that these program data demonstrate the ability of small firms well
under the current 750-employee size standard to fulfill the Federal
Government's remediation requirements; thus, it is unnecessary for SBA
to increase the size standard beyond the current threshold as the added
competition from larger firms could impact the number of opportunities
available for smaller small firms that are already thriving under the
current size standard. Additional commenters at the virtual public
forums agreed with the commenter's assertion that the current 750-
employee size standard for the ERS exception is adequate.
For the above reasons, these commenters concluded that SBA's 2016
increase in the ERS size standard from 500 employees to 750 employees
successfully increased small business participation in ERS contracts
and preserved competition within the industry. As such, the commenters
urged SBA to maintain the current 750-employee threshold instead of
adopting 1,000 employees, as proposed.

SBA Response

SBA has reviewed the data provided by the above commenters and has
determined that the results largely agree with the latest available
data that SBA evaluated in response to the commenters' arguments, as we

[[Page 9978]]

discussed in the section Comments Supporting SBA's Proposed Change to
the ERS Exception above. Moreover, consistent with the commenters, SBA
found that DOE awards accounted for 49.2 percent of total dollars
obligated under the ERS exception, of which only about 8.5 percent were
awarded to small businesses through prime contracts.
However, although SBA's further analysis of the ERS industry
confirmed some of the data submitted by commenters as presented above,
SBA also found important differences in the commenter's position and
SBA's evaluation, particularly in regards to SBA's evaluation of size
standards generally and the proportion of dollars awarded by DOE under
the exception through M&O contracts, a special class of contracts under
which the Federal Government contracts for the operation, management,
or support, on its behalf, of a government-owned or -controlled
establishment devoted to one or more major government programs.
Regarding SBA's evaluation of size standards generally, in the
proposed rule, SBA described its methodology for evaluating industry
structure to derive size standards based on five primary factors
including: average firm size (simple and weighted average firm size
factors), startup costs and entry barriers (average assets size
factor), industry competition (four-firm ratio factor), distribution of
firms by size (Gini coefficient factor), and small business success in
receiving Federal contracts under the current size standard (Federal
contracting factor). As detailed in Table 4 of the April 2022 proposed
rule, based on the data for fiscal years 2016-2018, SBA found that
three of the five industry factors analyzed supported raising the size
standard for the ERS industry above the current 750 employee threshold.
Specifically, the factors for simple and weighted average firm size
supported a size standard of 1,500 employees while the average assets
size and Gini coefficient supported size standards of 850 employees and
1,250 employees, respectively. Only the four-firm ratio supported a
size standard lower than 750 employees.
With respect to the Federal contracting factor, which measures
small business participation in the Federal market in terms of the
share of total Federal contract dollars awarded to small businesses
relative to the small business share of an industry's total receipts,
SBA found that the 750-employee size standard was appropriate. Based on
SBA's Size Standards Methodology, if the share of Federal contract
dollars awarded to small businesses in an industry is significantly
smaller than the small business share of total industry's receipts, all
else remaining the same, a justification would exist for considering a
size standard higher than the current size standard. In cases, where
small business share of the Federal market is already appreciably high
relative to the small business share of the overall market, SBA
generally assumes that the existing size standard is adequate with
respect to the Federal contracting factor. Thus, regarding the ERS
exception specifically, using the FPDS-NG data for fiscal years 2016-
2018, SBA calculated a Federal contracting factor to be 64.2 percent,
indicating the small business share of the Federal market is
appreciably high relative to the small business share of industry
receipts, which supported a size standard of 750 employees. Based on
this result, SBA agrees with commenters that small businesses in the
ERS industry are well-represented in the Federal contracting
marketplace under the current 750-employee size standard and have
adequate Federal contracting opportunities.
In the proposed rule, as an additional indicator, SBA also
considered the change in the share of total ERS contract dollars
awarded to small businesses from fiscal years 2013-2015 (under the 500-
employee size standard) to fiscal years 2016-2018 (under the 750-
employee size standard), finding that the small business share
decreased from about 50 percent during fiscal years 2013-2015 to about
37 percent during fiscal years 2016-2018. This result, alongside SBA's
analysis of industry factors demonstrated that an additional increase
to the ERS size standard was warranted in order to optimize and protect
the number of opportunities available to small businesses in the ERS
industry. However, SBA notes that this additional indicator was not the
primary basis for SBA's proposed increase to the size standard for the
ERS exception. SBA's further analysis of data from fiscal years 2019-
2021 showed that the small business share of total ERS contract dollars
increased to 43.5 percent from 37 percent in fiscal years 2016-2018;
however as previously stated, this is not a primary factor in SBA's
comprehensive analysis of the ERS industry nor is it the sole basis for
prescribing the size standard for the industry.
Based solely on the Federal contracting data, SBA agrees that the
750-employee size standard is appropriate for the ERS industry.
However, while SBA believes that analyzing Federal contracting trends,
including the Federal contracting factor, are an important component of
SBA's evaluation of industry size standards, SBA's size standards
methodology does not provide for the weighting of one factor more than
others. In other words, the methodology establishes that SBA will give
equal weights to all five primary factors that are considered in the
evaluation of an industry size standard. Thus, SBA believes that the
proposed size standard for the ERS industry, which is based on SBA's
comprehensive evaluation of industry and Federal contracting factors,
accurately reflects the economic characteristics of the industry,
including the high level of small business participation in the Federal
marketplace.
Regarding DOE's M&O contracts, SBA generally recognizes the special
nature of M&O contracts which have received special regulatory
treatment under Subpart 17.6 of the FAR. For example, when evaluating
agency contracting performance under SBA's procurement scorecard
assessment tool, starting from fiscal year 2015, SBA evaluates DOE's
prime contracting performance by including M&O first tier subcontracts
pursuant to 15 U.S.C. 644(g)(3). Thus, SBA believes commenters may be
justified in requesting that SBA count DOE's M&O first tier
subcontracts as prime contracts consistent with SBA's procurement
scorecard methodology. However, SBA does not agree with commenters that
the dollars obligated through DOE's M&O contracts should be excluded
altogether from the evaluation of the industry size standard since M&O
contracts are a valid and important part of the overall Federal
contracting landscape, and because the DOE accounts for roughly half of
total ERS contract dollars. SBA believes that excluding M&O contracts
from the evaluation of size standards, particularly for purposes of
calculating the Federal contracting factor, would lead to unreliable
results in industries where M&O contracts are used prominently.
Moreover, SBA found that, contrary to the commenter's suggestion,
it is not true that the majority of DOE contracts classified under the
ERS exception are M&O contracts.\5\ SBA obtained data from the DOE
listing its M&O contractors and showing the proportion of total dollars
awarded under the ERS exception to M&O contractors for fiscal years
2016-2021. The data showed that the DOE did not award any contracts

[[Page 9979]]

under the ERS exception to firms classified as an M&O contractor.
---------------------------------------------------------------------------

\5\ See Guidance on the Department of Energy Subcontracting
Program, Section 1.2 Background.
---------------------------------------------------------------------------

Based on data from the Electronic Subcontracting Reporting System
(eSRS), SBA found that small businesses were well represented in DOE's
first tier subcontracts classified under NAICS 562910. Specifically,
SBA analyzed the data from fiscal years 2016-2021 and found that, when
accounting for the dollars awarded to small businesses through first-
tier subcontracts, about 57 percent of total dollars awarded by DOE
under the ERS exception passed through to small businesses. Thus, even
if SBA considered all DOE awards under the exception as M&O contracts
and therefore counted the first-tier subcontracts as prime contracts,
SBA believes that the evaluation would reflect a high degree of small
business participation under the ERS exception, which, as explained
above, is consistent with SBA's results under the proposed rule.
Nonetheless, in response to the commenters' petition, SBA conducted
an analysis of the ERS industry using updated FPDS-NG data from fiscal
years 2019-2021 following the same methodology as detailed in the
proposed rule and in the SBA's Size Standards Methodology. SBA's
analysis using the more recent data did not support a size standard
lower than the SBA's proposed 1,000-employee size standard. In fact,
except for the weighted average firm size, values of each industry
factor based on the data for fiscal years 2019-2021 were higher than
those based on the data for fiscal years 2016-2018. Although the
weighted average firm size was lower in fiscal years 2016-2018,
weighted average firm size still supported a 1,500-employee size
standard. The Federal contracting factor based on the data for fiscal
years 2019-2021 continued to support the 750-employee size standard.
Regarding petitions by commenters for SBA to use alternative
sources of data to evaluate industry characteristics, specifically data
from the ENR on the top 200 environmental firms and EPA's Region 2
Superfund program, SBA disagrees that these sources would provide the
best representation of the ERS industry. SBA believes these data are
not comprehensive enough for SBA's purposes. For example, SBA's
analysis of the ERS industry included 974 firms participating in
Federal contracting under the exception to NAICS 562910 during fiscal
years 2019-2021, while the ENR dataset only includes the top 200
environmental firms. In order to reliably evaluate the size standard of
any industry, SBA must rely on comprehensive data that is
representative of the economic trends of the entire industry, rather
than only the top firms, or those associated with one agency's
contracting program.
SBA does not agree with the commenters that a few larger firms that
would qualify as small under the proposed 1,000-employee size standard
would have significant adverse impacts on small businesses under the
current 750-employee size standard in terms of access to Federal
opportunities to smaller small firms. The relevant data does not
demonstrate that the previous increase in size standard from 500
employees to 750 employees had a significant adverse impact on small
businesses below 500 employees in terms of accessing Federal small
business opportunities. For example, firms below 500 employees
accounted for 84 percent of total ERS dollars awarded to small
businesses during fiscal years 2019-2021.
SBA believes that increasing the size standard to the proposed
1,000-employee level based on its comprehensive evaluation of industry
and Federal contracting factors may increase the number of set-asides
in this industry and further benefit the small firms that are already
well-represented in the Federal contracting market at the current 750-
employee size standard. SBA believes that increasing the size standard
to 1,000 employees will expand the runway for small businesses to
compete for more complex remediation projects while also ensuring that
the Federal Government has access to a larger pool of qualified small
businesses to select from when issuing solicitations for ERS. As such,
based on SBA's evaluation of the above public comments pertaining to
the ERS exception and SBA's analyses of industry and Federal
contracting factors, SBA is adopting 1,000 employees as the size
standard for ERS as proposed in the April 2022 proposed rule.

Comments Opposing SBA's Proposed Change to the ERS Exception for Other
Reasons

One commenter opposing SBA's proposed increase to the size standard
for the ERS exception from 750 employees to 1,000 employees argued that
since SBA's analysis of Federal procurement data from fiscal years
2016-2018 in the proposed rule showed that the dollars obligated to
small businesses decreased significantly despite an increase to the
size standard from 500 employees to 750 employees in 2016, SBA should
forego increasing the size standard again, and instead, pursue other
methods of increasing small business participation. Specifically, the
commenter petitioned SBA to task, demand, encourage and/or impose on
Federal agencies higher small business participation goals. The
commenter also argued that SBA's proposed size standard increase would
adversely impact competition because currently small firms would find
it difficult to compete with larger firms with more advanced
capabilities. The commenter also urged SBA to implement rules and/or
programs to support smaller firms within the ERS industry, for example,
by creating a class of set-aside opportunities reserved for firms with
fewer than 50 employees. The commenter also expressed concerns over
what they viewed as discriminatory and inconsistent application of
NAICS code selection by contracting officers when determining the
applicable NAICS code for munitions response services, which are
sometimes misclassified under the ERS exception rather than the general
NAICS 562910 or some other more appropriate NAICS codes. The commenter
maintained that while some munitions remediation projects may require
engineers for planning purposes (i.e., NAICS 541330) and geophysical
survey and mapping services (i.e., NAICS 541360), these services
represent only a small portion of the contract dollars spent (usually
10-20%) on a munitions remediation project. The commenter further
explained that the overwhelming majority of funds allocated to
munitions remediation projects are spent on unexploded object (UXO)
technicians and labor to remove and dispose of the UXOs. Thus, citing
the requirements of ERS solicitations under Footnote 14, the commenter
argued that, since greater than 50 percent of the work related to
munitions remediation would be attributable to a single NAICS code, the
requirements for classifying the solicitation under the ERS exception
are not met. To remedy the misclassification of contracts for munitions
remediation services, the commenter recommended that SBA create a
separate NAICS code for munitions and UXO services and issue guidance
to contracting officers on the appropriate use of the ERS exception.

SBA Response

SBA disagrees with the comment that SBA should forego increasing
the size standard for the ERS exception and instead pursue other
methods of increasing small business participation, including higher
small business goals for Federal agencies and creating separate set-
aside opportunities for smaller small firms. SBA believes that
establishing appropriate size standards

[[Page 9980]]

for industries based on its Size Standards Methodology is not mutually
exclusive to conducting other engagement efforts to increase small
business participation.
Moreover, SBA believes that the aforementioned comment is largely
beyond the scope of this rulemaking as the proposed rule did not
propose any changes to SBA's goaling guidelines for Federal agencies,
nor did SBA propose establishing a separate class of set-aside
opportunities for smaller small businesses. By increasing the size
standard for the ERS exception to 1,000 employees, SBA will extend the
runway for firms to grow while also ensuring that small businesses
retain access to SBA's contracting and financial assistance programs.
Increasing the size standard to 1,000 employees will also improve
competition in the industry and help small businesses to earn more
Federal contracting dollars and compete for and perform more complex
environmental remediation projects.
Regarding the misclassification of munitions remediation projects
under the ERS exception rather than the general NAICS 562910, or some
other more appropriate NAICS codes, SBA notes that it is ultimately the
responsibility of the contracting officer to designate the proper NAICS
code based on the principal purpose of the product or service being
acquired (13 CFR 121.402(b)). SBA does not believe that changes to size
standards, including the creation of new NAICS industries or
exceptions, is an appropriate tool to address incorrect NAICS code
selections by contracting officers. More importantly, SBA does not have
authority to create new NAICS codes. SBA has established a process for
affected parties to appeal with SBA's Office of Hearings and Appeal
(OHA) a contracting officer's NAICS code designation in its regulations
at 13 CFR 121.1101. SBA encourages impacted firms to use this process
when they believe that a contracting officer has miscategorized a
solicitation under an improper NAICS code.
For the reasons stated above, SBA is not adopting the
recommendations of the commenter and is instead adopting 1,000
employees as the size standard for the ERS exception, as proposed in
the proposed rule.

General Comments on SBA's Proposed Changes to Size Standards

SBA received four comments pertaining to its proposed changes to
size standards generally, including one comment submitted orally as
part of SBA's virtual public forum on size standards. Of the four
comments received, two commenters supported SBA's proposed changes to
size standards while two commenters opposed the SBA's proposal. One
commenter supported SBA's increases to size standards, specifically for
industries under NAICS Sector 54, but only for agencies other than the
Department of Defense (DOD). The commenter expressed concern that
complex compliance requirements and other factors make it too costly
for small businesses to compete against larger established businesses
and that increases in the size thresholds would only exacerbate this
problem. The commenter did not specify which size levels would be more
appropriate for the Sector 54 industries covered under this rule or
offer data in support of their position. Another commenter supported
SBA's proposed changes to size standards because they believed the
changes would be beneficial to all small businesses, particularly to
those involved in government contracting.
Regarding the opposing comments, one commenter expressed opposition
to SBA's increases to size standards in general, specifically for dump
truck operators due to the increased competition that small operators
face from larger mid-sized trucking firms. The commenter also urged SBA
to look into the commercial insurance industry which has, according to
the commenter, more than doubled insurance rates over a timespan of
just a few months. The commenter did not specify which NAICS codes were
the subject of their comment, nor did they recommend any actions SBA
should take to address their comment on the commercial insurance
industry.
SBA also received one comment opposed to SBA's changes to size
standards from a business operating under NAICS 561110 (Office
Administrative Services). The commenter opposed any increases to size
standards at this time, citing concerns about an impending economic
recession, category management impacts, and best-in-class requirements
which together reduce small business opportunities and the total number
of small businesses. The commenter urged SBA to help small businesses
facing these concerns by improving its engagement efforts through
increased access to financial assistance and other support rather than
increasing size standards.

SBA Response

SBA agrees with commenters supporting SBA's proposed changes to
size standards that the proposed changes are beneficial to small
businesses and will increase the number of Federal contracting
opportunities available for small businesses. However, SBA disagrees
with the comment supporting SBA's proposed changes in Sector 54, but
only for agencies other than DOD. SBA does not believe that size
standards should differ among Federal agencies based on the contracting
preferences or requirements of each agency as this would result in a
complicated regime of size standards that may fluctuate along with an
agency's budget and priorities instead of the economic characteristics
of the industry in which a firm operates. Moreover, to evaluate the
size standards for industries within Sector 54, SBA relied on its size
standards methodology. SBA's size standards methodology describes how
its analyses of various industry and program factors are used to
establish and revise size standards based on the latest data available.
Thus, SBA believes that the size standards adopted in this final rule,
including for industries within Sector 54, appropriately reflect the
intended beneficiaries of SBA programs. Thus, SBA is adopting the size
standards for industries in Sector 54 without change.
SBA also disagrees with the comment that expressed opposition to
SBA's increases to size standards in general, but specifically for dump
truck operators, urging SBA to take action to address increased
insurance costs imposed by the commercial insurance industry. SBA
believes that this comment is out of the scope of this rulemaking as
dump truck operators normally operate under NAICS 484220 (Specialized
Freight (except Used Goods) Trucking, Local), NAICS 532120 (Truck,
Utility Trailer, and RV (Recreational Vehicle) Rental and Leasing), or
NAICS 562119 (Other Waste Collection), all of which have receipts-based
size standards and were not covered under the proposed rule. Moreover,
SBA does not have the authority to regulate the commercial insurance
industry, which operates mostly under industries with receipt-based
size standards not covered under this rule. It is also unclear how an
adjustment to size standards within the commercial insurance industry
would translate to lower insurance premiums for small business owners.
Thus, SBA is not adjusting the size standards for any industries in
response to this comment.
SBA also disagrees with the comment opposing any increases to size
standards based on various concerns including the broader economic
environment and certain Federal contracting trends that are reducing
opportunities for small businesses. SBA believes that all small

[[Page 9981]]

businesses will benefit under a size standard that is appropriate to
their industry. SBA's changes to size standards help small businesses
to remain competitive in the Federal market and ensure that SBA's
services go to their intended beneficiaries. Moreover, Table 9 of this
final rule, Impacts of Increasing Size Standards, below, demonstrates
the benefits of size standards increases, which would remain unrealized
if SBA were to not adopt any increases to size standards. For example,
based on its impact analysis, SBA estimates that increasing size
standards would result in additional contracting opportunities for more
than 100 small businesses worth nearly $257 million. Thus, based on
SBA's estimation of the positive net benefits accruing to small
businesses as a result of the changes to size standards, SBA disagrees
with the commenter that increases to size standards are harmful to
small businesses. Therefore, SBA is adopting proposed increases to size
standards as presented in the proposed rule.

Comments Pertaining to Other Issues

SBA received three comments pertaining to issues other than those
already discussed above. One commenter, representing an optics
manufacturer, in anticipation of SBA's adoption of Office of Management
and Budget's (OMB) NAICS 2022 industry structure, petitioned SBA to
adopt 1,000 employees as the size standard for NAICS 333310, which is a
newly defined industry under NAICS 2022 encompassing elements from
NAICS 333314, 333316, and 333318. The commenter argued that adopting
the higher size standard would expand the runway for small businesses
in this industry to compete against a greater number of large
competitors with greater resources. Another commenter petitioned SBA to
require all United States Department of Agriculture (USDA) regulated
entities with current USDA certification status to be available for
periodic surveys and questionnaires regarding their ability to spot,
detect and report human trafficking. Another commenter petitioned SBA
to reconsider the current minimum and maximum size threshold values for
employee-based size standards. The commenter expressed concern with
SBA's language in the proposed rule describing the minimum size
standard as the size an established small business should be to have
adequate capabilities and resources to be able to compete for and
perform Federal contracts, but does not account for small businesses
that are newly formed or just starting operations. The commenter
maintained that, contrary to SBA's language, as small businesses adopt
new technologies and innovation, it is possible to have adequate
capabilities and resources to perform Federal contracts without a high
employee count. Thus, the commenter urged SBA to explore measures such
as financial statements, sales revenue, years in business and other
applicable methods to determine capability and competency. The
commenter also argued that SBA's minimum thresholds affect small
business access to Federal procurement.

SBA Response

SBA agrees with the comment petitioning SBA to adopt 1,000
employees as the size standard for NAICS 333310 under the NAICS 2022
industry structure. On July 5, 2022, SBA published a proposed rule in
the Federal Register with proposed revisions to size standards based on
OMB's NAICS 2022 structure (87 FR 40034). In the proposed rule, SBA
proposed 1,000 employees as the size standard for NAICS 333310 and
adopted the proposed size standard in a final rule, effective October
1, 2022 (87 FR 59240; September 29, 2022). In this final rule, SBA is
adopting changes to size standards based on the NAICS 2017 structure
and applying the adopted changes to the recently adopted NAICS 2022
structure. SBA's NAICS adoption analysis, presented in this final rule
under the section ``Applying the Adopted Changes to the NAICS 2022
Structure,'' supports adopting 1,000 employees as the size standard for
NAICS 333310 based on SBA's established NAICS adoption methodology.
Regarding the comment petitioning SBA to establish reporting
requirements for certain operators under USDA's regulations, SBA notes
that it does not have authority to regulate the trucking industry, nor
does the Agency have purview over any USDA's certification programs.
Thus, SBA has determined that this comment is totally outside the scope
of this final rule.
Regarding the comment petitioning SBA to reconsider the current
minimum and maximum threshold values for employee-based size standards,
SBA evaluated employee-based size standards under this rule using its
``Size Standards Methodology'' (Methodology), issued on April 11, 2019,
and available at <a href="http://www.sba.gov/size">www.sba.gov/size</a>. SBA's Methodology provides a
detailed description of its analyses of various industry and program
factors and data sources, and how the agency uses the results to
establish and revise size standards. Prior to finalizing the revised
Methodology, SBA issued a notification in the April 27, 2018, edition
of the Federal Register (83 FR 18468) to solicit comments from the
public and notify stakeholders of the proposed changes to the
Methodology. SBA considered all public comments in finalizing the
revised Methodology. For a summary of comments and SBA's responses,
refer to the SBA's April 11, 2019, Federal Register notification of the
issuance of the final revised Methodology (84 FR 14587).
Pursuant to the Methodology, SBA has established 250 employees and
1,500 employees, respectively, as the minimum and maximum size standard
levels for Manufacturing and other industries (excluding Wholesale and
Retail Trade) with employee-based size standards. Accordingly, SBA will
not generally propose or adopt a size standard that is either below the
minimum level or above the maximum, even though the calculations yield
values below the minimum or above the maximum levels. As stated in the
proposed rule, the minimum size standard reflects the size an
established small business should be to have adequate capabilities and
resources to be able to compete for and perform Federal contracts (but
does not account for small businesses that are newly formed or just
starting operations). On the other hand, the maximum size standard
represents the level above which businesses, if qualified as small,
would outcompete much smaller businesses when accessing Federal small
business assistance. SBA notes that SBA's table of size standards at 13
CFR 121.201 only defines the largest a business can be and still be
considered small. As such, although SBA uses 250 employees as the
minimum size threshold for SBA's analysis of size standards, firms with
less than 250 employees may still qualify as small businesses since
they would be below the size threshold for their respective industry.
Thus, SBA does not agree with the commenter that maintaining a minimum
threshold for purposes of analysis of industry factors disadvantages
small firms below the minimum threshold or excludes them from
contracting opportunities. Moreover, SBA believes that this comment is
likely beyond the scope of this rulemaking as the proposed rule did not
propose any changes to SBA's Size Standards Methodology, which was
finalized through notice and comment process in April 2019. SBA notes
that the size standards reflect the maximum

[[Page 9982]]

size a business can be to be considered small.

Summary of Adopted Revisions to Size Standards

Based on the evaluation of public comments it received on the
proposed rule and on its analyses of industry and Federal contracting
factors using the latest available data when the proposed rule was
prepared along with considerations of impacts of the ongoing COVID-19
pandemic, in this final rule, SBA is adopting the size standards as
proposed in the April 26, 2022, proposed rule. Thus, SBA is increasing
size standards for 150 industries under NAICS 2017, including 10
industries in NAICS Sector 21 (Mining, Quarrying, and Oil and Gas
Extraction), 10 industries in NAICS Sector 22 (Utilities), 120
industries in NAICS Sector 31-33 (Manufacturing), five industries in
Sector 48-49 (Transportation and Warehousing), three industries in
NAICS Sector 51 (Information), and one subindustry (or ``exception'')
each in NAICS Sector 54 (Professional, Scientific and Technical
Services) and in NAICS Sector 56 (Administrative and Support, Waste
Management and Remediation Services). SBA's size standards revisions
adopted in this rule can be found in Table 2, Adopted Size Standards
Revisions (NAICS 2017). Also presented in Table 2 are current and
calculated size standards for comparison.

Table 2--Adopted Size Standards Revisions
[NAICS 2017]
----------------------------------------------------------------------------------------------------------------
Proposed/
NAICS 2017 industry Current size Calculated adopted size
NAICS 2017 code title standard size standard standard
(employees) (employees) (employees)
----------------------------------------------------------------------------------------------------------------
212113................................ Anthracite Mining....... 250 600 250
212210................................ Iron Ore Mining......... 750 1,400 1,400
212222................................ Silver Ore Mining....... 250 1,100 250
212230................................ Copper, Nickel, Lead, 750 1,400 1,400
and Zinc Mining.
212291................................ Uranium-Radium-Vanadium 250 900 250
Ore Mining.
212299................................ All Other Metal Ore 750 1,250 1,250
Mining.
212313................................ Crushed and Broken 750 850 850
Granite Mining and
Quarrying.
212319................................ Other Crushed and Broken 500 550 550
Stone Mining and
Quarrying.
212322................................ Industrial Sand Mining.. 500 750 750
212324................................ Kaolin and Ball Clay 750 1,050 750
Mining.
212325................................ Clay and Ceramic and 500 650 650
Refractory Minerals
Mining.
212391................................ Potash, Soda, and Borate 750 1,050 1,050
Mineral Mining.
212392................................ Phosphate Rock Mining... 1,000 1,350 1,000
212393................................ Other Chemical and 500 600 600
Fertilizer Mineral
Mining.
212399................................ All Other Nonmetallic 500 600 600
Mineral Mining.
221111................................ Hydroelectric Power 500 750 750
Generation.
221112................................ Fossil Fuel Electric 750 950 950
Power Generation.
221113................................ Nuclear Electric Power 750 1,150 1,150
Generation.
221114................................ Solar Electric Power 250 700 500
Generation.
221115................................ Wind Electric Power 250 1,150 1,150
Generation.
221116................................ Geothermal Electric 250 1,050 250
Power Generation.
221117................................ Biomass Electric Power 250 550 550
Generation.
221118................................ Other Electric Power 250 650 650
Generation.
221121................................ Electric Bulk Power 500 950 950
Transmission and
Control.
221122................................ Electric Power 1,000 1,100 1,100
Distribution.
221210................................ Natural Gas Distribution 1,000 1,150 1,150
311111................................ Dog and Cat Food 1,000 1,250 1,250
Manufacturing.
311119................................ Other Animal Food 500 650 650
Manufacturing.
311211................................ Flour Milling........... 1,000 1,050 1,050
311212................................ Rice Milling............ 500 750 750
311213................................ Malt Manufacturing...... 500 900 500
311221................................ Wet Corn Milling........ 1,250 1,300 1,300
311224................................ Soybean and Other 1,000 1,250 1,250
Oilseed Processing.
311225................................ Fats and Oils Refining 1,000 1,100 1,100
and Blending.
311230................................ Breakfast Cereal 1,000 1,300 1,300
Manufacturing.
311313................................ Beet Sugar Manufacturing 750 1,150 1,150
311314................................ Cane Sugar Manufacturing 1,000 1,050 1,050
311411................................ Frozen Fruit, Juice, and 1,000 1,100 1,100
Vegetable Manufacturing.
311422................................ Specialty Canning....... 1,250 1,400 1,400
311511................................ Fluid Milk Manufacturing 1,000 1,150 1,150
311512................................ Creamery Butter 750 1,000 750
Manufacturing.
311514................................ Dry, Condensed, and 750 1,000 1,000
Evaporated Dairy
Product Manufacturing.
311611................................ Animal (except Poultry) 1,000 1,150 1,150
Slaughtering.
311824................................ Dry Pasta, Dough, and 750 850 850
Flour Mixes
Manufacturing from
Purchased Flour.
311920................................ Coffee and Tea 750 1,000 1,000
Manufacturing.
311930................................ Flavoring Syrup and 1,000 1,100 1,100
Concentrate
Manufacturing.
311941................................ Mayonnaise, Dressing, 750 850 850
and Other Prepared
Sauce Manufacturing.
311942................................ Spice and Extract 500 650 650
Manufacturing.
311991................................ Perishable Prepared Food 500 700 700
Manufacturing.
311999................................ All Other Miscellaneous 500 700 700
Food Manufacturing.

[[Page 9983]]

312111................................ Soft Drink Manufacturing 1,250 1,400 1,400
312112................................ Bottled Water 1,000 1,100 1,100
Manufacturing.
312140................................ Distilleries............ 1,000 1,100 1,100
313220................................ Narrow Fabric Mills and 500 550 550
Schiffli Machine
Embroidery.
313230................................ Nonwoven Fabric Mills... 750 850 850
314999................................ All Other Miscellaneous 500 550 550
Textile Product Mills.
315190................................ Other Apparel Knitting 750 850 850
Mills.
315990................................ Apparel Accessories and 500 600 600
Other Apparel
Manufacturing.
316110................................ Leather and Hide Tanning 500 800 800
and Finishing.
316992................................ Women's Handbag and 750 850 750
Purse Manufacturing.
321113................................ Sawmills................ 500 550 550
321114................................ Wood Preservation....... 500 550 550
321211................................ Hardwood Veneer and 500 600 600
Plywood Manufacturing.
322110................................ Pulp Mills.............. 750 1,050 1,050
322122................................ Newsprint Mills......... 750 1,050 1,050
323111................................ Commercial Printing 500 650 650
(except Screen and
Books).
323120................................ Support Activities for 500 550 550
Printing.
324122................................ Asphalt Shingle and 750 1,100 1,100
Coating Materials
Manufacturing.
324191................................ Petroleum Lubricating 750 900 900
Oil and Grease
Manufacturing.
324199................................ All Other Petroleum and 500 950 950
Coal Products
Manufacturing.
325110................................ Petrochemical 1,000 1,300 1,300
Manufacturing.
325120................................ Industrial Gas 1,000 1,200 1,200
Manufacturing.
325130................................ Synthetic Dye and 1,000 1,050 1,050
Pigment Manufacturing.
325220................................ Artificial and Synthetic 1,000 1,050 1,050
Fibers and Filaments
Manufacturing.
325311................................ Nitrogenous Fertilizer 1,000 1,050 1,050
Manufacturing.
325312................................ Phosphatic Fertilizer 750 1,350 1,350
Manufacturing.
325314................................ Fertilizer (Mixing Only) 500 550 550
Manufacturing.
325320................................ Pesticide and Other 1,000 1,150 1,150
Agricultural Chemical
Manufacturing.
325412................................ Pharmaceutical 1,250 1,300 1,300
Preparation
Manufacturing.
325520................................ Adhesive Manufacturing.. 500 550 550
325611................................ Soap and Other Detergent 1,000 1,100 1,100
Manufacturing.
325612................................ Polish and Other 750 900 900
Sanitation Good
Manufacturing.
325613................................ Surface Active Agent 750 1,100 1,100
Manufacturing.
325910................................ Printing Ink 500 750 750
Manufacturing.
325991................................ Custom Compounding of 500 600 600
Purchased Resins.
325998................................ All Other Miscellaneous 500 650 650
Chemical Product and
Preparation
Manufacturing.
326121................................ Unlaminated Plastics 500 600 600
Profile Shape
Manufacturing.
326130................................ Laminated Plastics 500 650 650
Plate, Sheet (except
Packaging), and Shape
Manufacturing.
326220................................ Rubber and Plastics 750 800 800
Hoses and Belting
Manufacturing.
326299................................ All Other Rubber Product 500 650 650
Manufacturing.
327211................................ Flat Glass Manufacturing 1,000 1,100 1,100
327410................................ Lime Manufacturing...... 750 1,050 1,050
327910................................ Abrasive Product 750 900 900
Manufacturing.
327992................................ Ground or Treated 500 600 600
Mineral and Earth
Manufacturing.
327999................................ All Other Miscellaneous 500 750 750
Nonmetallic Mineral
Product Manufacturing.
331313................................ Alumina Refining and 1,000 1,300 1,300
Primary Aluminum
Production.
331315................................ Aluminum Sheet, Plate, 1,250 1,400 1,400
and Foil Manufacturing.
331420................................ Copper Rolling, Drawing, 1,000 1,050 1,050
Extruding, and Alloying.
331491................................ Nonferrous Metal (except 750 900 900
Copper and Aluminum)
Rolling, Drawing, and
Extruding.
331492................................ Secondary Smelting, 750 850 850
Refining, and Alloying
of Nonferrous Metal
(except Copper and
Aluminum).
331512................................ Steel Investment 1,000 1,050 1,050
Foundries.
331513................................ Steel Foundries (except 500 700 700
Investment).
331523................................ Nonferrous Metal Die- 500 700 700
Casting Foundries.
331524................................ Aluminum Foundries 500 550 550
(except Die-Casting).
332112................................ Nonferrous Forging...... 750 950 950
332114................................ Custom Roll Forming..... 500 600 600
332117................................ Powder Metallurgy Part 500 550 550
Manufacturing.
332215................................ Metal Kitchen Cookware, 750 1,000 1,000
Utensil, Cutlery, and
Flatware (except
Precious) Manufacturing.
332439................................ Other Metal Container 500 600 600
Manufacturing.
332613................................ Spring Manufacturing.... 500 600 600
332722................................ Bolt, Nut, Screw, Rivet, 500 600 600
and Washer
Manufacturing.

[[Page 9984]]

332812................................ Metal Coating, Engraving 500 600 600
(except Jewelry and
Silverware), and Allied
Services to
Manufacturers.
332992................................ Small Arms Ammunition 1,250 1,300 1,300
Manufacturing.
332996................................ Fabricated Pipe and Pipe 500 550 550
Fitting Manufacturing.
333131................................ Mining Machinery and 500 900 900
Equipment Manufacturing.
333243................................ Sawmill, Woodworking, 500 550 550
and Paper Machinery
Manufacturing.
333314................................ Optical Instrument and 500 600 600
Lens Manufacturing.
333924................................ Industrial Truck, 750 900 900
Tractor, Trailer, and
Stacker Machinery
Manufacturing.
333991................................ Power-Driven Hand Tool 500 950 950
Manufacturing.
333993................................ Packaging Machinery 500 600 600
Manufacturing.
333995................................ Fluid Power Cylinder and 750 800 800
Actuator Manufacturing.
333997................................ Scale and Balance 500 700 700
Manufacturing.
334290................................ Other Communications 750 800 800
Equipment Manufacturing.
334416................................ Capacitor, Resistor, 500 550 550
Coil, Transformer, and
Other Inductor
Manufacturing.
334511................................ Search, Detection, 1,250 1,350 1,350
Navigation, Guidance,
Aeronautical, and
Nautical System and
Instrument
Manufacturing.
334512................................ Automatic Environmental 500 650 650
Control Manufacturing
for Residential,
Commercial, and
Appliance Use.
334514................................ Totalizing Fluid Meter 750 850 850
and Counting Device
Manufacturing.
334517................................ Irradiation Apparatus 1,000 1,200 1,200
Manufacturing.
334519................................ Other Measuring and 500 600 600
Controlling Device
Manufacturing.
335122................................ Commercial, Industrial, 500 600 600
and Institutional
Electric Lighting
Fixture Manufacturing.
335129................................ Other Lighting Equipment 500 550 550
Manufacturing.
335311................................ Power, Distribution, and 750 800 800
Specialty Transformer
Manufacturing.
335912................................ Primary Battery 1,000 1,300 1,300
Manufacturing.
335931................................ Current-Carrying Wiring 500 600 600
Device Manufacturing.
335991................................ Carbon and Graphite 750 900 900
Product Manufacturing.
335999................................ All Other Miscellaneous 500 600 600
Electrical Equipment
and Component
Manufacturing.
336310................................ Motor Vehicle Gasoline 1,000 1,050 1,050
Engine and Engine Parts
Manufacturing.
336414................................ Guided Missile and Space 1,250 1,300 1,300
Vehicle Manufacturing.
336419................................ Other Guided Missile and 1,000 1,050 1,050
Space Vehicle Parts and
Auxiliary Equipment
Manufacturing.
336611................................ Ship Building and 1,250 1,300 1,300
Repairing.
336991................................ Motorcycle, Bicycle, and 1,000 1,050 1,050
Parts Manufacturing.
337125................................ Household Furniture 750 950 950
(except Wood and Metal)
Manufacturing.
337214................................ Office Furniture (except 1,000 1,100 1,100
Wood) Manufacturing.
339113................................ Surgical Appliance and 750 800 800
Supplies Manufacturing.
339910................................ Jewelry and Silverware 500 700 700
Manufacturing.
339930................................ Doll, Toy, and Game 500 700 700
Manufacturing.
339991................................ Gasket, Packing, and 500 600 600
Sealing Device
Manufacturing.
339994................................ Broom, Brush, and Mop 500 750 750
Manufacturing.
339999................................ All Other Miscellaneous 500 550 550
Manufacturing.
483111................................ Deep Sea Freight 500 1,050 1,050
Transportation.
483113................................ Coastal and Great Lakes 750 800 800
Freight Transportation.
483114................................ Coastal and Great Lakes 500 550 550
Passenger
Transportation.
483211................................ Inland Water Freight 750 1,050 1,050
Transportation.
483212................................ Inland Water Passenger 500 550 550
Transportation.
511199................................ All Other Publishers.... 500 550 550
512230................................ Music Publishers........ 750 900 900
512250................................ Record Production and 250 900 900
Distribution.
541715 (Exception 3).................. Guided Missiles and 1,250 1,300 1,300
Space Vehicles, Their
Propulsion Units and
Propulsion Parts.
562910 (Exception..................... Environmental 750 1,000 1,000
Remediation Services.
----------------------------------------------------------------------------------------------------------------

Table 3, Summary of Adopted Size Standards Revisions by Sector
(NAICS 2017), summarizes the adopted changes to size standards by NAICS
sector.

[[Page 9985]]

Table 3--Summary of Adopted Size Standards Revisions by Sector
[NAICS 2017]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Number of size Number of size Number of size Number of size
Sector Sector name standards standards standards standards
reviewed increased decreased maintained
--------------------------------------------------------------------------------------------------------------------------------------------------------
21............................................ Mining, Quarrying, and Oil and 24 10 0 14
Gas Extraction.
22............................................ Utilities....................... 11 10 0 1
31-33......................................... Manufacturing................... 360 120 0 240
48-49......................................... Transportation and Warehousing.. 15 5 0 10
51............................................ Information..................... 12 3 0 9
54............................................ Professional, Scientific and 7 1 0 6
Technical Services.
Other Sectors................................. Agriculture, Forestry, Fishing 3 1 0 2
and Hunting; Finance and
Insurance; Administrative and
Support, Waste Management and
Remediation Services.
-----------------------------------------------------------------------
Total..................................... ................................ 432 150 0 282
--------------------------------------------------------------------------------------------------------------------------------------------------------

Applying the Adopted Changes to the NAICS 2022 Structure

Under this final rule, SBA has reviewed the size standards for 56
NAICS 2017 industries or their parts with employee-based size standards
(excluding employee-based size standards in Sectors 42 and 44-45) and
one industry with a receipts-based size standard that were split,
merged, or modified to become part of 36 new industries under OMB's
NAICS 2022 changes. Overall, OMB's NAICS 2022 revisions created 111 new
industries by reclassifying, combining, or splitting 156 NAICS 2017
industries or their parts.\6\
---------------------------------------------------------------------------

\6\ Complete information on the relationship between NAICS 2017
and NAICS 2022 is available on the U.S. Bureau of the Census (Census
Bureau) website at <a href="https://www.census.gov/naics/">https://www.census.gov/naics/</a>. The Census
Bureau's website also provides detailed documentation on Federal
notices involving the replacement of SIC with NAICS, and all
subsequent NAICS updates and revisions, including both the July 2,
2021, and December 21, 2021, Federal notices regarding the NAICS
2022 revision.
---------------------------------------------------------------------------

Prior to issuing this final rule on employee-based size standards,
SBA incorporated OMB's NAICS 2022 changes into its Table of Size
Standards at 13 CFR 121.201 in a final rule, effective October 1, 2022
(87 FR 59240; September 29, 2022), using the newly adopted size
standards under SBA's review of size standards under the Jobs Act.
Specifically, as stated above, as part of SBA's second five-year review
of size standards under the Jobs Act, SBA revised all monetary-based
size standards and employee-based size standards under NAICS Sectors 42
(Wholesale Trade) and 44-45 (Retail Trade).
Of the 36 new industries with employee-based size standards
(excluding Sectors 42 and 44-45) that were created under the NAICS 2022
revision, 27 were formed by combining more than one NAICS 2017 industry
or industry part, often with new 6-digit codes and industry titles.
Three new industries were formed by changing the 6-digit code without
changing the industry title, two industries were formed by changing the
title without changing the 6-digit code, and four remaining industries
had either their content, definition, or content changed, usually
involving parts of NAICS 2017 industries.
SBA's methodology for incorporating OMB's NAICS revisions into size
standards is generally well-established. On October 22, 1999, SBA
proposed to replace the Standard Industrial Classification (SIC) System
with NAICS 1997 as the basis of industry definitions for its table of
small business size standards (64 FR 57188). The proposed rule included
a set of guidelines or rules that SBA applied to convert the size
standards for industries under SIC to industries under NAICS. The
guidelines primarily aimed to minimize the impact of applying a new
industry classification system on SBA's size standards and on small
businesses that qualified as small under the SIC-based size standards.
SBA received no negative comments against the proposed guidelines.
Thus, SBA published its final rule on May 15, 2000 (65 FR 30386),
corrected on September 5, 2000 (65 FR 53533), adopting the resulting
table of size standards based on NAICS 1997 structure, as proposed. To
be consistent, SBA generally applied the same guidelines when it
updated its table of size standards to adopt NAICS 2002, NAICS 2007,
NAICS 2012, NAICS 2017, and NAICS 2022 revisions. In those updates as
well, SBA received no adverse comments against using those guidelines,
or against the resulting changes to the size standards. These
guidelines to adopt OMB's NAICS revisions were also included in the
SBA's ``Size Standards Methodology'' white paper and SBA received no
adverse comments when the revised methodology was open for public
comments. The applicable guidelines are shown below in Table 4,
``General Guidelines to Establish Size Standards for New Industries
under NAICS 2022.''

Table 4--General Guidelines To Establish Size Standards for New
Industries Under NAICS 2022
------------------------------------------------------------------------
The size standard for the NAICS
If the NAICS 2022 industry is composed 2022 industry code will be:
of:
------------------------------------------------------------------------
1. A single NAICS 2012 industry or part The same size standard as for
of a single NAICS 2012 industry. the NAICS 2012 industry or
part.
2. Two or more NAICS 2017 industries; ...............................
two or more parts of an NAICS 2017
industry; parts of two or more NAICS
2017 industries; or one or more NAICS
2017 industries and part(s) of one or
more NAICS 2017 industries, and
2a. they all have the same size The same size standard as for
standard. the NAICS 2017 industries or
parts.

[[Page 9986]]

2b. they all have the same size The same size standard as for
measure (e.g., receipts, the NAICS 2017 industry or
employees, etc.) but do not all part that most closely matches
have the same size standard. the economic activity
described by the NAICS 2022
industry, or
The highest size standard among
the NAICS 2017 industries and
part(s) that comprise the
NAICS 2022 industry, provided
that the highest size standard
does not include dominant or
potentially dominant firms.
2c. they have different size The same size standard as for
measures (i.e., for example, some the NAICS 2017 industry or
are based on receipts and others part that most closely matches
on employees) and hence do not all the economic activity
have the same size standard. described by the NAICS 2022
industry, or
The highest size standard among
the NAICS 2017 industries and
part(s) that comprise the
NAICS 2022 industry, provided
that the highest size standard
does not include dominant or
potentially dominant firms.
To apply this rule, SBA
converts all size standards to
a single measure (e.g.,
receipts, employees, etc.)
using the size measure for the
NAICS 2017 industry or part(s)
that most closely match the
economic activity described by
the NAICS 2022 industry or
using the size measure that
applies to most of the NAICS
industries or parts comprising
the NAICS 2022 industry.
------------------------------------------------------------------------

Thus, in this final rule, SBA is incorporating the adopted size
standards, as presented in Table 2 (above), into the table of size
standards based on NAICS 2022 following the guidelines prescribed in
Table 4 (above).
SBA identified 56 NAICS 2017 unique industries or their parts
reviewed under this final rule that became part of 37 new industries
under NAICS 2022. New size standards for the 37 new NAICS 2022
industries resulted in a reduction in size standard for eight
industries under NAICS 2017, an increase to size standard for 12
industries and 2 parts of one industry, change in the size standard
from employees to receipts for one industry, and no change in size
standards for the remaining 35 NAICS 2017 industries or their parts.
Among the 37 new industries under NAICS 2022 evaluated in this final
rule, compared to the size standards adopted in the September 2022
NAICS 2022 adoption final rule, size standards increased for 10
industries and remained the same for the remaining 27 industries. Table
5, Size Standards for Industries Under NAICS 2017 Matched to NAICS
2022, below, presents these results.

Table 5--Size Standards for Industries Under NAICS 2017 Matched to NAICS 2022
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
NAICS 2017 industry NAICS 2017
title (and specific NAICS 2017 standard NAICS 2022 standard standard
NAICS 2022 industry Concordance piece of the NAICS prior to NAICS 2022 after NAICS 2022 adopted under NAICS 2022 standard
NAICS 2022 code title with NAICS 2017 industry that is adoption (employees or $ adoption (employees or $ this final under this final rule
2017 code contained in the million) million) rule (employees or $ million)
NAICS 2022 industry) (employees)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
212114............................. Surface Coal Mining... 212111 Bituminous Coal and 1,250................... 1,250................... 1,250 1,250.
Lignite Surface
Mining.
212113 Anthracite Mining-- 250..................... ........................ 250
Anthracite surface
mining.
212115............................. Underground Coal 212112 Bituminous Coal 1,500................... 1,500................... 1,500 1,500.
Mining. Underground Mining.
212113 Anthracite Mining-- 250..................... ........................ 250
Anthracite
underground mining.
212220............................. Gold Ore and Silver 212221 Gold Ore Mining...... 1,500................... 1,500................... 1,500 1,500.
Ore Mining. 212222 Silver Ore Mining.... 250..................... 250
212290............................. Other Metal Ore Mining 212291 Uranium-Radium- 250..................... 750..................... 250 1,250.
Vanadium Ore Mining.
212299 All Other Metal Ore 750..................... ........................ 1,250
Mining.
212323............................. Kaolin, Clay, and 212324 Kaolin and Ball Clay 750..................... 500..................... 750 650.
Ceramic and Mining.
Refractory Minerals
Mining.
212325 Clay and Ceramic and 500..................... ........................ 650
Refractory Minerals
Mining.
212390............................. Other Nonmetallic 212391 Potash, Soda, and 750..................... 500..................... 1,050 600.
Mineral Mining and Borate Mineral
Quarrying. Mining.
212392 Phosphate Rock Mining 1,000................... ........................ 1,000
212393 Other Chemical and 500..................... ........................ 600
Fertilizer Mineral
Mining.
212399 All Other Nonmetallic 500..................... ........................ 600
Mineral Mining.
311221............................. Wet Corn Milling and 311221 Wet Corn Milling..... 1,250................... 1,250................... 1,300 1,300.
Starch Manufacturing.
315120............................. Apparel Knitting Mills 315110 Hosiery and Sock 750..................... 750..................... 750 850.
Mills.
315190 Other Apparel 750..................... ........................ 850
Knitting Mills.

[[Page 9987]]

315250............................. Cut and Sew Apparel 315220 Men's and Boys' Cut 750..................... 750..................... 750 750.
Manufacturing (except and Sew Apparel
Contractors). Manufacturing.
315240 Women's, Girls', and 750..................... ........................ 750
Infants' Cut and Sew
Apparel
Manufacturing.
315280 Other Cut and Sew 750..................... ........................ 750
Apparel
Manufacturing.
316990............................. Other Leather and 316992 Women's Handbag and 750..................... 500..................... 750 500.
Allied Product Purse Manufacturing.
Manufacturing.
316998 All Other Leather 500..................... ........................ 500
Good and Allied
Product
Manufacturing.
321215............................. Engineered Wood Member 321213 Engineered Wood 750..................... 500..................... 750 500.
Manufacturing. Member (except
Truss) Manufacturing.
321214 Truss Manufacturing.. 500..................... ........................ 500
322120............................. Paper Mills........... 322121 Paper (except 1,250................... 1,250................... 1,250 1,250.
Newsprint) Mills.
322122 Newsprint Mills...... 750..................... ........................ 1,050
325314............................. Fertilizer (Mixing 325314 Fertilizer (Mixing 500..................... 500..................... 550 550.
Only) Manufacturing. Only) Manufacturing--
except compost
manufacturing.
325315............................. Compost Manufacturing. 325314 Fertilizer (Mixing 500..................... 500..................... 550 550.
Only) Manufacturing--
compost
manufacturing.
325992............................. Photographic Film, 325992 Photographic Film, 1,500................... 1,500................... 1,500 1,500.
Paper, Plate, Paper, Plate, and
Chemical, and Copy Chemical
Toner Manufacturing. Manufacturing.
333248............................. All Other Industrial 333244 Printing Machinery 750..................... 750..................... 750 750.
Machinery and Equipment
Manufacturing. Manufacturing.
333249 Other Industrial 500..................... ........................ 500
Machinery
Manufacturing.
333310............................. Commercial and Service 333314 Optical Instrument 500..................... 1,000................... 600 1,000.
Industry Machinery and Lens
Manufacturing. Manufacturing.
333316 Photographic and 1,000................... 1,000................... ..............
Photocopying
Equipment
Manufacturing.
333318 Other Commercial and 1,000................... ........................ 1,000
Service Industry
Machinery
Manufacturing.
333998............................. All Other 333997 Scale and Balance 500..................... 500..................... 700 700.
Miscellaneous General Manufacturing.
Purpose Machinery
Manufacturing.
333999 All Other 500..................... ........................ 500
Miscellaneous
General Purpose
Machinery
Manufacturing.
334610............................. Manufacturing and 334613 Blank Magnetic and 1,000................... 1,250................... 1,000 1,250.
Reproducing Magnetic Optical Recording
and Optical Media. Media Manufacturing.
334614 Software and Other 1,250................... ........................ 1,250
Prerecorded Compact
Disc, Tape, and
Record Reproducing.
335131............................. Residential Electric 335121 Residential Electric 750..................... 750..................... 750 750.
Lighting Fixture Lighting Fixture
Manufacturing. Manufacturing.
335132............................. Commercial, 335122 Commercial, 500..................... 500..................... 600 600.
Industrial, and Industrial, and
Institutional Institutional
Electric Lighting Electric Lighting
Fixture Manufacturing. Fixture
Manufacturing.
335139............................. Electric Lamp Bulb and 335110 Electric Lamp Bulb 1,250................... 1,250................... 1,250 1,250.
Other Lighting and Part
Equipment Manufacturing.
Manufacturing.
335129 Other Lighting 500..................... ........................ 550
Equipment
Manufacturing.
335910............................. Battery Manufacturing. 335911 Storage Battery 1,250................... 1,250................... 1,250 1,250.
Manufacturing.
335912 Primary Battery 1,000................... ........................ 1,300
Manufacturing.
336110............................. Automobile and Light 336111 Automobile 1,500................... 1,500................... 1,500 1,500.
Duty Motor Vehicle Manufacturing.
Manufacturing.

[[Page 9988]]

336112 Light Truck and 1,500................... ........................ 1,500
Utility Vehicle
Manufacturing.
337126............................. Household Furniture 337124 Metal Household 750..................... 750..................... 750 950.
(except Wood and Furniture
Upholstered) Manufacturing.
Manufacturing.
337125 Household Furniture 750..................... ........................ 950
(except Wood and
Metal) Manufacturing.
513110............................. Newspaper Publishers.. 511110 Newspaper Publishers. 1,000................... 1,000................... 1,000 1,000.
519130 Internet Publishing 1,000................... ........................ 1,000
and Broadcasting and
Web Search Portals--
Internet newspaper
publishers.
513120............................. Periodical Publishers. 511120 Periodical Publishers 1,000................... 1,000................... 1,000 1,000.
519130 Internet Publishing 1,000................... ........................ 1,000
and Broadcasting and
Web Search Portals --
Internet periodical
publishers.
513130............................. Book Publishers....... 511130 Book Publishers...... 1,000................... 1,000................... 1,000 1,000.
519130 Internet Publishing 1,000................... ........................ 1,000
and Broadcasting and
Web Search Portals--
Internet book
publishers.
513140............................. Directory and Mailing 511140 Directory and Mailing 1,250................... 1,000................... 1,250 1,000.
List Publishers. List Publishers.
519130 Internet Publishing 1,000................... ........................ 1,000
and Broadcasting and
Web Search Portals--
Internet directory
and mailing list
publishers.
513191............................. Greeting Card 511191 Greeting Card 1,500................... 1,000................... 1,500 1,000.
Publishers. Publishers.
519130 Internet Publishing 1,000................... ........................ 1,000
and Broadcasting and
Web Search Portals--
Internet greeting
card publishers.
513199............................. All Other Publishers.. 511199 All Other Publishers. 500..................... 1,000................... 550 1,000.
519130 Internet Publishing 1,000................... ........................ 1,000
and Broadcasting and
Web Search Portals--
All other Internet
publishers.
516210............................. Media Streaming 515111 Radio Networks....... $41.5 million........... $41.5 million........... .............. $41.5 million.
Distribution
Services, Social
Networks, and Other
Media Networks and
Content Providers.
515120 Television $41.5 million........... ........................ ..............
Broadcasting--televi
sion networks.
515210 Cable and Other $41.5 million........... ........................ ..............
Subscription
Programming.
519110 News Syndicates...... $32.0 million........... ........................ ..............
519130 Internet Publishing 1,000................... ........................ 1,000
and Broadcasting and
Web Search Portals--
Internet
broadcasting.
517111............................. Wired 517311 Wired 1,500................... 1,500................... 1,500 1,500.
Telecommunications Telecommunications
Carriers. Carriers.
517112............................. Wireless 517312 Wireless 1,500................... 1,500................... 1,500 1,500.
Telecommunications Telecommunications
Carriers (except Carriers (except
Satellite). Satellite)--Except
agents for wireless
telecommunications
carriers.
517121............................. Telecommunications 517911 Telecommunications 1,500................... 1,500................... 1,500 1,500.
Resellers. Resellers--Except
agents for wireless
telecommunications
resellers.
517122............................. Agents for Wireless 517312 Wireless 1,500................... 1,500................... 1,500 1,500.
Telecommunications Telecommunications
Services. Carriers (except
Satellite)--Agents
for wireless
telecommunications
carriers.
517911 Telecommunications 1,500................... ........................ 1,500
Resellers--Agents
for wireless
telecommunications
resellers.

[[Page 9989]]

519290............................. Web Search Portals and 519130 Internet Publishing 1,000................... 1,000................... 1,000 1,000.
All Other Information and Broadcasting and
Services. Web Search Portals--
Web search portals.
519190 All Other Information $30.0 million...........
Services.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

By combining the results of Table 2 and Table 5 (above), in Table 6
(below), Adopted Size Standard Revisions (NAICS 2022), SBA presents
revisions to size standards resulting from the incorporation of the
adopted size standards into the NAICS 2022 structure.

Table 6--Adopted Size Standards Revisions
[NAICS 2022]
----------------------------------------------------------------------------------------------------------------
Current size Adopted size
2022 NAICS Code NAICS 2022 industry title standards standards
(employees) (employees)
----------------------------------------------------------------------------------------------------------------
212210..................................... Iron Ore Mining.................... 750 1,400
212230..................................... Copper, Nickel, Lead, and Zinc 750 1,400
Mining.
212290..................................... Other Metal Ore Mining............. 750 1,250
212313..................................... Crushed and Broken Granite Mining 750 850
and Quarrying.
212319..................................... Other Crushed and Broken Stone 500 550
Mining and Quarrying.
212322..................................... Industrial Sand Mining............. 500 750
212323..................................... Kaolin, Clay, and Ceramic and 500 650
Refractory Minerals Mining.
212390..................................... Other Nonmetallic Mineral Mining 500 600
and Quarrying.
221111..................................... Hydroelectric Power Generation..... 500 750
221112..................................... Fossil Fuel Electric Power 750 950
Generation.
221113..................................... Nuclear Electric Power Generation.. 750 1,150
221114..................................... Solar Electric Power Generation.... 250 500
221115..................................... Wind Electric Power Generation..... 250 1,150
221117..................................... Biomass Electric Power Generation.. 250 550
221118..................................... Other Electric Power Generation.... 250 650
221121..................................... Electric Bulk Power Transmission 500 950
and Control.
221122..................................... Electric Power Distribution........ 1,000 1,100
221210..................................... Natural Gas Distribution........... 1,000 1,150
311111..................................... Dog and Cat Food Manufacturing..... 1,000 1,250
311119..................................... Other Animal Food Manufacturing.... 500 650
311211..................................... Flour Milling...................... 1,000 1,050
311212..................................... Rice Milling....................... 500 750
311221..................................... Wet Corn Milling and Starch 1,250 1,300
Manufacturing.
311224..................................... Soybean and Other Oilseed 1,000 1,250
Processing.
311225..................................... Fats and Oils Refining and Blending 1,000 1,100
311230..................................... Breakfast Cereal Manufacturing..... 1,000 1,300
311313..................................... Beet Sugar Manufacturing........... 750 1,150
311314..................................... Cane Sugar Manufacturing........... 1,000 1,050
311411..................................... Frozen Fruit, Juice, and Vegetable 1,000 1,100
Manufacturing.
311422..................................... Specialty Canning.................. 1,250 1,400
311511..................................... Fluid Milk Manufacturing........... 1,000 1,150
311514..................................... Dry, Condensed, and Evaporated 750 1,000
Dairy Product Manufacturing.
311611..................................... Animal (except Poultry) 1,000 1,150
Slaughtering.
311824..................................... Dry Pasta, Dough, and Flour Mixes 750 850
Manufacturing from Purchased Flour.
311920..................................... Coffee and Tea Manufacturing....... 750 1,000
311930..................................... Flavoring Syrup and Concentrate 1,000 1,100
Manufacturing.
311941..................................... Mayonnaise, Dressing, and Other 750 850
Prepared Sauce Manufacturing.
311942..................................... Spice and Extract Manufacturing.... 500 650
311991..................................... Perishable Prepared Food 500 700
Manufacturing.
311999..................................... All Other Miscellaneous Food 500 700
Manufacturing.
312111..................................... Soft Drink Manufacturing........... 1,250 1,400
312112..................................... Bottled Water Manufacturing........ 1,000 1,100
312140..................................... Distilleries....................... 1,000 1,100
313220..................................... Narrow Fabric Mills and Schiffli 500 550
Machine Embroidery.
313230..................................... Nonwoven Fabric Mills.............. 750 850
314999..................................... All Other Miscellaneous Textile 500 550
Product Mills.
315120..................................... Apparel Knitting Mills............. 750 850
315990..................................... Apparel Accessories and Other 500 600
Apparel Manufacturing.
316110..................................... Leather and Hide Tanning and 500 800
Finishing.

[[Page 9990]]

321113..................................... Sawmills........................... 500 550
321114..................................... Wood Preservation.................. 500 550
321211..................................... Hardwood Veneer and Plywood 500 600
Manufacturing.
322110..................................... Pulp Mills......................... 750 1,050
323111..................................... Commercial Printing (except Screen 500 650
and Books).
323120..................................... Support Activities for Printing.... 500 550
324122..................................... Asphalt Shingle and Coating 750 1,100
Materials Manufacturing.
324191..................................... Petroleum Lubricating Oil and 750 900
Grease Manufacturing.
324199..................................... All Other Petroleum and Coal 500 950
Products Manufacturing.
325110..................................... Petrochemical Manufacturing........ 1,000 1,300
325120..................................... Industrial Gas Manufacturing....... 1,000 1,200
325130..................................... Synthetic Dye and Pigment 1,000 1,050
Manufacturing.
325220..................................... Artificial and Synthetic Fibers and 1,000 1,050
Filaments Manufacturing.
325311..................................... Nitrogenous Fertilizer 1,000 1,050
Manufacturing.
325312..................................... Phosphatic Fertilizer Manufacturing 750 1,350
325314..................................... Fertilizer (Mixing Only) 500 550
Manufacturing.
325315..................................... Compost Manufacturing.............. 500 550
325320..................................... Pesticide and Other Agricultural 1,000 1,150
Chemical Manufacturing.
325412..................................... Pharmaceutical Preparation 1,250 1,300
Manufacturing.
325520..................................... Adhesive Manufacturing............. 500 550
325611..................................... Soap and Other Detergent 1,000 1,100
Manufacturing.
325612..................................... Polish and Other Sanitation Good 750 900
Manufacturing.
325613..................................... Surface Active Agent Manufacturing. 750 1,100
325910..................................... Printing Ink Manufacturing......... 500 750
325991..................................... Custom Compounding of Purchased 500 600
Resins.
325998..................................... All Other Miscellaneous Chemical 500 650
Product and Preparation
Manufacturing.
326121..................................... Unlaminated Plastics Profile Shape 500 600
Manufacturing.
326130..................................... Laminated Plastics Plate, Sheet 500 650
(except Packaging), and Shape
Manufacturing.
326220..................................... Rubber and Plastics Hoses and 750 800
Belting Manufacturing.
326299..................................... All Other Rubber Product 500 650
Manufacturing.
327211..................................... Flat Glass Manufacturing........... 1,000 1,100
327410..................................... Lime Manufacturing................. 750 1,050
327910..................................... Abrasive Product Manufacturing..... 750 900
327992..................................... Ground or Treated Mineral and Earth 500 600
Manufacturing.
327999..................................... All Other Miscellaneous Nonmetallic 500 750
Mineral Product Manufacturing.
331313..................................... Alumina Refining and Primary 1,000 1,300
Aluminum Production.
331315..................................... Aluminum Sheet, Plate, and Foil 1,250 1,400
Manufacturing.
331420..................................... Copper Rolling, Drawing, Extruding, 1,000 1,050
and Alloying.
331491..................................... Nonferrous Metal (except Copper and 750 900
Aluminum) Rolling, Drawing, and
Extruding.
331492..................................... Secondary Smelting, Refining, and 750 850
Alloying of Nonferrous Metal
(except Copper and Aluminum).
331512..................................... Steel Investment Foundries......... 1,000 1,050
331513..................................... Steel Foundries (except Investment) 500 700
331523..................................... Nonferrous Metal Die-Casting 500 700
Foundries.
331524..................................... Aluminum Foundries (except Die- 500 550
Casting).
332112..................................... Nonferrous Forging................. 750 950
332114..................................... Custom Roll Forming................ 500 600
332117..................................... Powder Metallurgy Part 500 550
Manufacturing.
332215..................................... Metal Kitchen Cookware, Utensil, 750 1,000
Cutlery, and Flatware (except
Precious) Manufacturing.
332439..................................... Other Metal Container Manufacturing 500 600
332613..................................... Spring Manufacturing............... 500 600
332722..................................... Bolt, Nut, Screw, Rivet, and Washer 500 600
Manufacturing.
332812..................................... Metal Coating, Engraving (except 500 600
Jewelry and Silverware), and
Allied Services to Manufacturers.
332992..................................... Small Arms Ammunition Manufacturing 1,250 1,300
332996..................................... Fabricated Pipe and Pipe Fitting 500 550
Manufacturing.
333131..................................... Mining Machinery and Equipment 500 900
Manufacturing.
333243..................................... Sawmill, Woodworking, and Paper 500 550
Machinery Manufacturing.
333924..................................... Industrial Truck, Tractor, Trailer, 750 900
and Stacker Machinery
Manufacturing.
333991..................................... Power-Driven Hand Tool 500 950
Manufacturing.
333993..................................... Packaging Machinery Manufacturing.. 500 600
333995..................................... Fluid Power Cylinder and Actuator 750 800
Manufacturing.
333998..................................... All Other Miscellaneous General 500 700
Purpose Machinery Manufacturing.
334290..................................... Other Communications Equipment 750 800
Manufacturing.
334416..................................... Capacitor, Resistor, Coil, 500 550
Transformer, and Other Inductor
Manufacturing.
334511..................................... Search, Detection, Navigation, 1,250 1,350
Guidance, Aeronautical, and
Nautical System and Instrument
Manufacturing.

[[Page 9991]]

334512..................................... Automatic Environmental Control 500 650
Manufacturing for Residential,
Commercial, and Appliance Use.
334514..................................... Totalizing Fluid Meter and Counting 750 850
Device Manufacturing.
334517..................................... Irradiation Apparatus Manufacturing 1,000 1,200
334519..................................... Other Measuring and Controlling 500 600
Device Manufacturing.
335132..................................... Commercial, Industrial, and 500 600
Institutional Electric Lighting
Fixture Manufacturing.
335311..................................... Power, Distribution, and Specialty 750 800
Transformer Manufacturing.
335931..................................... Current-Carrying Wiring Device 500 600
Manufacturing.
335991..................................... Carbon and Graphite Product 750 900
Manufacturing.
335999..................................... All Other Miscellaneous Electrical 500 600
Equipment and Component
Manufacturing.
336310..................................... Motor Vehicle Gasoline Engine and 1,000 1,050
Engine Parts Manufacturing.
336414..................................... Guided Missile and Space Vehicle 1,250 1,300
Manufacturing.
336419..................................... Other Guided Missile and Space 1,000 1,050
Vehicle Parts and Auxiliary
Equipment Manufacturing.
336611..................................... Ship Building and Repairing........ 1,250 1,300
336991..................................... Motorcycle, Bicycle, and Parts 1,000 1,050
Manufacturing.
337126..................................... Household Furniture (except Wood 750 950
and Upholstered) Manufacturing.
337214..................................... Office Furniture (except Wood) 1,000 1,100
Manufacturing.
339113..................................... Surgical Appliance and Supplies 750 800
Manufacturing.
339910..................................... Jewelry and Silverware 500 700
Manufacturing.
339930..................................... Doll, Toy, and Game Manufacturing.. 500 700
339991..................................... Gasket, Packing, and Sealing Device 500 600
Manufacturing.
339994..................................... Broom, Brush, and Mop Manufacturing 500 750
339999..................................... All Other Miscellaneous 500 550
Manufacturing.
483111..................................... Deep Sea Freight Transportation.... 500 1,050
483113..................................... Coastal and Great Lakes Freight 750 800
Transportation.
483114..................................... Coastal and Great Lakes Passenger 500 550
Transportation.
483211..................................... Inland Water Freight Transportation 750 1,050
483212..................................... Inland Water Passenger 500 550
Transportation.
512230..................................... Music Publishers................... 750 900
512250..................................... Record Production and Distribution. 250 900
541715 (Exception 3)....................... Guided Missiles and Space Vehicles, 1,250 1,300
Their Propulsion Units and
Propulsion Parts.
562910 (Exception)......................... Environmental Remediation Services. 750 1,000
----------------------------------------------------------------------------------------------------------------

Table 7, Summary of Adopted Size Standards Revisions by Sector
(NAICS 2022), summarizes the adopted changes to size standards in this
final rule by NAICS sector. Accordingly, of 412 NAICS 2022 employee-
based size standards reviewed in this rule, SBA is increasing 144,
including 117 in Sector 31-33, ten in Sector 22, eight in Sector 21,
five in Sector 48-49, two in Sector 51, and one each in Sector 54 and
Sector 56. SBA is retaining the remaining 268 employee-based size
standards in those sectors, including 204 size standards that would
decrease based on analytical results. In the April 2022 proposed rule
as well as other rulemakings as part of the second five-year review of
size standards, in response to the impact of the COVID-19 pandemic, SBA
maintained current size standards where the analytical results
supported decreases. SBA is also retaining the remaining 64 size
standards for which the results suggested no changes.

Table 7--Summary of Adopted Size Standards Revisions by Sector
[NAICS 2022]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Number of size Number of size Number of size Number of size
NAICS sector Sector name standards standards standards standards
reviewed increased decreased maintained
--------------------------------------------------------------------------------------------------------------------------------------------------------
21............................................. Mining, Quarrying, and Oil and Gas 17 8 0 9
Extraction.
22............................................. Utilities.............................. 11 10 0 1
31-33.......................................... Manufacturing.......................... 346 117 0 229
48-49.......................................... Transportation and Warehousing......... 15 5 0 10
51............................................. Information............................ 13 2 0 11
54............................................. Professional, Scientific and Technical 7 1 0 6
Services.
Other Sectors.................................. Agriculture, Forestry, Fishing and 3 1 0 2
Hunting; Finance and Insurance;
Administrative and Support, Waste
Management and Remediation Services.
---------------------------------------------------------------
Total...................................... ....................................... 412 144 0 268
--------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 9992]]

Evaluation of Dominance in Field of Operation

SBA determined that for the industries evaluated under this final
rule, no individual firm at or below the revised size standards in
Table 6 (above) would be large enough to dominate its field of
operation. At the size standard levels adopted in this final rule,
based on 2017 Economic Census, an individual firm's share of total
industry receipts among those industries would be, on average, 2.3
percent, varying from 0.1 percent to 21.4 percent. Generally, SBA
believes the shares below 40 percent would preclude dominant firms from
qualifying as small and exerting control on any industry. Thus, the
above market shares effectively preclude a firm at or below the revised
size standards from exerting control on any of the industries.

Alternatives Considered

In response to the unprecedented economic impacts of the COVID-19
pandemic on small businesses and government response, SBA is adopting
increases to size standards where the data suggests increases are
warranted; and retaining all current size standards where the data
suggested lowering is appropriate. SBA is also retaining all current
size standards where the data suggested no changes to the current size
standards.
Nonetheless, SBA considered two other alternatives. Alternative
Option One was to adopt changes to size standards exactly as suggested
by the analytical results. In other words, Alternative Option One would
entail increasing size standards for 144 industries or subindustries,
decreasing size standards for 204 industries or subindustries, and
retaining size standards at their current levels for 64 industries or
subindustries. Alternative Option Two was to retain all current size
standards.
SBA is not adopting Alternative Option One because it would cause a
substantial number of currently small businesses to lose their small
business status and hence to lose their access to Federal small
business assistance, especially small business set-aside contracts and
SBA's financial assistance in some cases. Impacts of lowering size
standards under Alternative Option One are discussed in detail in the
Regulatory Impact Analysis section of this rule. Lowering size
standards in the current environment would also run counter to various
measures the Federal Government has implemented to help small
businesses and the overall economy recover from the ongoing COVID-19
pandemic. Given the effects of the 2007-2009 Great Recession, and the
resulting government actions to support small businesses and the
overall economy, SBA also adopted a policy of not decreasing size
standards during the first five-year review of size standards, even
though the data supported decreases.
Under Alternative Option Two, given the current COVID-19 pandemic,
SBA considered retaining the current levels of all size standards even
though the analysis of relevant data suggested changing them. Under
this option, as the current situation develops, SBA will be able to
assess new data available on economic indicators, Federal procurement,
and SBA loans before adopting changes to size standards. However, SBA
is not adopting Alternative Option Two because results discussed in the
Regulatory Impact Analysis section, below, show that retaining all size
standards at their current levels would cause otherwise qualified small
businesses to forgo various small business benefits becoming available
to them under the option of increasing 144 and retaining 268 employee-
based size standards. Such benefits would include access to Federal
contracts set aside for small businesses and capital through SBA's loan
and SBIC programs, and exemptions from paperwork and other compliance
requirements.

Federal Procurement Size Standard for Nonmanufacturers

In the April 2022 proposed rule, SBA proposed to maintain the 500-
employee size standard for nonmanufacturers. Based on the evaluation of
public comments pertaining to SBA's proposed size standard, its
analyses of industry factors using the latest available data when the
proposed rule was prepared, and SBA's considerations of other factors
outlined in the proposed rule as well as public comments discussed
above, in this final rule, SBA is adopting 500 employees as the size
standard applicable to nonmanufacturers under 13 CFR 121.406 as
proposed in the April 26, 2022, proposed rule.

Compliance With Executive Orders 12866, the Congressional Review Act (5
U.S.C. 801-808), the Regulatory Flexibility Act (5 U.S.C. 601-612),
Executive Orders 13563, 12988, and 13132, and the Paperwork Reduction
Act (44 U.S.C. Ch. 35)

Executive Order 12866

The Office of Management and Budget (OMB) has determined that this
final rule is a significant regulatory action for purposes of Executive
Order 12866. Accordingly, in the next section SBA provides a Regulatory
Impact Analysis of this final rule, including (1) A statement of the
need for the regulatory action, (2) An examination of alternative
regulatory approaches, and (3) An estimate of the benefits and costs--
both quantitative and qualitative--of the regulatory action and the
alternatives considered.

Regulatory Impact Analysis

1. What is the need for this regulatory action?
SBA's mission is to aid and assist small businesses through a
variety of financial, procurement, business development and counseling,
and disaster assistance programs. To determine the actual intended
beneficiaries of these programs, SBA establishes numerical size
standards by industry to identify businesses that are deemed small.
Under the Small Business Act (Act) (15 U.S.C. 632(a)), SBA's
Administrator is responsible for establishing small business size
definitions (or ``size standards'') and ensuring that such definitions
vary from industry to industry to reflect differences among various
industries. The Jobs Act requires SBA to review every five years all
size standards and make necessary adjustments to reflect current
industry and Federal market conditions. This final rule is part of the
second five-year review of size standards in accordance with the Jobs
Act. The first five-year review of size standards was completed in
early 2016. Such periodic reviews of size standards provide SBA with an
opportunity to incorporate ongoing changes to industry structure and
Federal market environment into size standards and to evaluate the
impacts of prior revisions to size standards on small businesses. This
also provides SBA with an opportunity to seek and incorporate public
input to the size standards review and analysis. SBA believes that the
size standards revisions adopted for industries being reviewed in this
final rule will make size standards more reflective of the current
economic characteristics of businesses in those industries and the
latest trends in Federal marketplace.
The revisions to the existing size standards for 144 industries or
subindustries (or ``exceptions''), including 117 industries in Sector
31-33 and 27 industries and subindustries in other sectors are
consistent with SBA's statutory mandate to help small businesses grow
and create jobs and to review and adjust size standards every five
years. This regulatory action

[[Page 9993]]

promotes the Administration's goals and objectives as well as meets the
SBA's statutory responsibility. One of SBA's goals in support of
promoting the Administration's objectives is to help small businesses
succeed through fair and equitable access to capital and credit,
Federal Government contracts and purchases, and management and
technical assistance

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This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.