SBA proposes revisions to employee-based size standards for manufacturing and other industry sectors

September 11, 2014 by

The U.S. Small Business Administration (SBA) has published two proposed rules to revise small business size standards in North American Industry Classification System (NAICS) Sector 31-33 (Manufacturing) and industries with employee-based size standards that are not a part of NAICS Sector 31-33, Sector 42 (Wholesale Trade), and Sector 44-45 (Retail Trade).  The proposed rules were published in the Federal Register on Sept. 10, 2014.

As part of its comprehensive size standards review required by the Small Business Jobs Act of 2010, the SBA evaluated employee-based size standards for all 364 industries in NAICS Sector 31-33 and 57 industries and five exceptions that are not in NAICS Sectors 31-33, 42, or 44‑45 to determine whether they should be retained or revised.

In the first rule, SBA proposes to increase size standards for 209 industries in Sector 31-33.  The SBA also proposes to increase the refining capacity component of the Petroleum Refiners (NAICS 324110) size standard to 200,000 barrels per calendar day total capacity for businesses that are primarily engaged in petroleum refining.  The proposed rule also eliminates the requirement that 90 percent of a refiner’s output being delivered should be refined by the bidder.

In the second rule, SBA proposes to increase the employee-based size standards for 30 industries and three exceptions and decrease them for three industries that are not in Sectors 31-33, 42, or 44‑45.

Additionally, SBA proposes to remove the Information Technology Value Added Resellers exception under NAICS 541519 (Other Computer Related Services) together with its 150-employee-based size standard.  Similarly, SBA also proposes to eliminate the Offshore Marine Air Transportation Services exception under NAICS 481211 and 481212 and Offshore Marine Services exception under NAICS Subsector 483 and their $30.5 million receipts based size standard.  Accordingly, the second proposed rule also removes Footnotes 15 and 18 from the table of size standards.

If the changes in the two rules are adopted as proposed, nearly 1,650 more firms will become small and eligible for federal procurement and SBA’s loan programs.

Comments can be submitted on the proposed rules on or before November 10, 2014 at www.regulations.gov, identified by the following RIN numbers: (RIN 3245-AG50 for Sector 31‑33) and (RIN 3245-AG51 for employee-based size standards for industries that are not part of Sector 31-33, Sector 42 or Sector 44-45).  You may also mail comments to Khem R. Sharma, Chief, Office of Size Standards, 409 3rd St., SW, Mail Code 6530, Washington, DC  20416.

For size standards review, SBA takes into account the structural characteristics of individual industries, including average firm size, startup cost and entry barriers, the degree of competition, and small business share of federal government contracting dollars.  This ensures that small business size definitions reflect current economic conditions and federal marketplace in those industries.

An SBA-issued White Paper entitled, “Size Standards Methodology,” which explains how SBA establishes, reviews and modifies its receipts-based and employee-based small business size standards, can be viewed at http://www.sba.gov/size.

For more information about SBA’s revisions to its small business size standards for various industry sectors, click on “What’s New with Size Standards” on SBA’s Web site at http://www.sba.gov/size.

Family relationship, revenues and subcontracts caused affiliation, says SBA

September 5, 2014 by

A small business was affiliated with companies owned by the business owner’s father and siblings, based on the family relationship and the companies’ ongoing history of doing business together.

In a recent size appeal decision, the SBA Office of Hearings and Appeals held that the small business had not successfully rebutted the regulatory presumption that companies owned by close family members are affiliated, because the small business had earned substantial revenues from the alleged affiliates, and intended to issue a subcontract to both affiliates with respect to the procurement at issue.

SBA OHA’s decision in Size Appeal of Industrial Support Service, LLC, SBA No. SIZ-5576 (2014) involved an Army Corps of Engineers solicitation seeking a contractor to provide certain repair work.  The solicitation was issued as a small business set-aside under NAICS code 238290 (Other Building Equipment Contractors).

Keep reading this article at: http://smallgovcon.com/sbaohadecisions/family-relationship-plus-revenues-subcontracts-caused-affiliation-says-sba-oha/

How many big contractors are actually posing as small businesses?

August 25, 2014 by

In the sixth of its annual studies, a small business advocacy group has again blasted the government for allegedly awarding contracts to major corporations when policy intends for them to go to legitimate small businesses. The Small Business Administration offered other possible explanations for the apparent discrepancies.

The Petaluma, Calif.-based American Small Business League’s new study of fiscal 2013 procurement data concluded that of the top 100 companies receiving the highest-valued small business federal contracts, “79 were large companies that exceeded the SBA’s small business size standards, five were anomalous and 16 were legitimate small businesses.”

The group’s annual studies also show that the number of top-100 contracting companies that are large firms has risen steadily, from 60 in fiscal 2009 to 84 in fiscal 2013.

The large corporations that received the contracts in question in fiscal 2013 included Lockheed Martin Corp., General Dynamics Corp., Boeing Co., General Electric, Oracle Corp., Apple Inc., Verizon, Bank of America Corp., Citigroup Inc., PepsiCo, Comcast Corp., Intel Corp., John Deere Co. and many more, said the league, which published brief company-by-company profiles.

Keep reading this article at: http://www.govexec.com/contracting/2014/08/how-many-big-contractors-are-actually-posing-small-businesses/91694 

Small biz size status ordinarily is based on underlying GSA Schedule contract

July 8, 2014 by

When a small business submits an offer for a Blanket Purchase Agreement issued against a GSA Schedule contract, the offeror does not automatically recertify its size.  Rather, a new regulation effective December 31, 2013 provides that an offeror’s size status for a BPA issued against a GSA Schedule ordinarily is determined by looking to the offeror’s self-certification for the underlying GSA Schedule contract.

In a recent size appeal decision, the SBA Office of Hearings and Appeals relied, in part, on the new regulation to find that an offeror had not recertified its small business status by submitting a quotation for a BPA to be issued against the offeror’s GSA Schedule contract.

SBA OHA’s decision in Size Appeal of Total Systems Technologies Corp., SBA No. SIZ-5562 (2014) involved a Homeland Security RFQ for business management support at the Coast Guard’s C4IT Service Center.  The Coast Guard issued the RFQ under the MOBIS Schedule 874, and stated that the RFQ would result in the award of a single BPA.  The RFQ was set aside for HUBZone firms.

Keep reading this article at: http://smallgovcon.com/sbaohadecisions/gsa-schedule-bpa-awards-size-status-ordinarily-is-based-on-underlying-gsa-schedule-contract/

 

Revenue-based small business size standards to increase on July 14

July 8, 2014 by

You probably know that the federal government’s definition of a small business is based on either the number of people that a company employs or the amount of revenue it earns annually.  The number-of-employees or the gross-revenue standards are applied to individual North American Industrial Classification System (NAICS) codes.  One or more NAICS codes apply to every business.

Thus, in order to determine whether a company is a small business in the eyes of the government, one must first determine which NAICS code or codes apply to the business, and then see what size standard (employees or revenue) applies to each NAICS code.  If a business has fewer employees or earns less annual revenue (averaged over the past three years) than the standard, then that business can represent itself to the federal government as a small business.  This is an important determination to make since the federal government sets an annual goal of awarding 23 percent of its contract dollars to small businesses.

It’s been more than five years since the Small Business Administration (SBA) updated the revenue size standards for small businesses.  Therefore, as of July 14, 2014, the SBA is adjusting virtually all of its size standards that are based upon revenue, to account for the years of inflation since the last adjustment. 

The forthcoming adjustment affects almost half of all NAICS code categories.    In all,  476  industrial categories will be affected by the update,  including most service, construction, retail, agricultural and transportation industries. 

With these increases, the new small business size standards range between $5.5 million and $38.5 million.

Using the Gross Domestic Product price index to obtain the most comprehensive measure of inflation, the SBA determined that the amount of inflation that occurred between the first quarter of 2008 and the last quarter of 2013 was 8.73 percent.   The SBA then calculated the new size standards by multiplying the current size standards by 1.0873 and then rounding that total to the nearest $500,000.  After these adjustments,

This latest adjustment of the revenue-based size standards for inflation is separate from the comprehensive review of all size standards that the SBA is supposed to perform at least every five years.

The new size standards can be found at: http://www.regulations.gov/#!documentDetail;D=SBA-2014-0009-0001.  Busineeses have until August 11, 2014 to submit any comments on these rules which technically are “interim final rules” at this point.

Because these new size standards will apply to certificates of small business size status signed on or after July 14, 2014, small (and near-small) businesses should review the new size standards to determine whether they now qualify as a small business concern.   Businesses also should visit the System for Award Management (SAM) and verify that their profile and certifications are up to date based on the revised size standards.

See more details on the SBA’s website at: http://www.sba.gov/content/what%27s-new-with-size-standards.

SBA increases small business size standards for construction

June 27, 2014 by

The SBA has published an interim final rule which increase in size standards for nine major categories of construction.    SBA size standards define the maximum size a firm can be and still be considered a small business.   The new standards are shown in the table below.

While the increases in the size standards are not dramatic, they could make a difference for construction companies on the verge of graduating; those that have recently graduated; and those that want to submit offers as a small business.

The interim rule is effective July 14, 2014, and can be found at: http://www.gpo.gov/fdsys/pkg/FR-2014-06-12/pdf/2014-12868.pdf.

NAICS Code

NAICS U.S. Industry Title

Old Standard

New Standard

238210

Electrical Contractors and Other Wiring Installation Contractors

$14 million

$15 million

237130

Power and Communication Line and Related Structures Construction

$33.5 million

$36.5 million

236210

Industrial Building Construction

$33.5 million

$36.5 million

236220

Commercial and Institutional Building Construction

$33.5 million

$36.5 million

237110

Water and Sewer Line and Related Structures Construction

$33.5 million

$36.5 million

237120

Oil and Gas Pipeline and Related Structures Construction

$33.5 million

$36.5 million

237210

Land Subdivision

$25.5 million

$27.5 million

237310

Highway, Street, and Bridge Construction

$33.5 million

$36.5 million

237990

Other Heavy and Civil Engineering Construction

$33.5 million

$36.5 million

237990

Dredging and Surface Cleanup Activities

$25.5 million

$27.5 million

Subsector 238

Specialty Trade Contractors

$14 million

$15 million

The new size standards will govern what contractors can certify as small businesses when they bid on or submit a proposal for projects on or after July 14, 2014, or seek certification, after that date, through the SBA for the 8(a), HUBZone or woman-owned small business programs or seek verification through the Department of Veterans Affairs for the Veteran Owned or Service-Disabled Veteran Owned small business programs.

Contractors at or near the size standard should take this opportunity to conduct a review of their last three fiscal years’ tax returns to determine their average annual receipts. 

Newly organized concern affiliation: “Key Employee” must influence entire company

June 16, 2014 by

Newly organized concern affiliation under the SBA’s affiliation rules did not exist when the alleged former key employee of the affiliate did not exercise influence over the entire company.

In a recent decision, the SBA Office of Hearings and Appeals held that no matter the size of the alleged affiliate, a former “key employee” must have had the ability to influence the entire company in order for the newly organized concern affiliation rule to apply.

SBA OHA’s decision in Size Appeal of Metis Technology Solutions, Inc., SBA No. SIZ-5538 (2014) involved a size determination conducted in connection with Metis Technology Solutions’ application for admission to the 8(a) program.  The SBA Area Office initially found Metis to be affiliated with two large businesses.

Metis subsequently applied for recertification as a small business.  The SBA Area Office found that Metis was no longer affiliated with one of the large businesses.  However, the SBA Area Office found that Metis was still affiliated with the second large business, Booz Allen Hamilton, Inc., under the newly organized concern affiliation rule.

Keep reading this article at: http://smallgovcon.com/sbaohadecisions/newly-organized-concern-affiliation-key-employee-must-influence-entire-company/

Small business size standards increased for two major industry categories

December 19, 2012 by

The U.S. Small Business Administration (SBA) has published two final rules revising size definitions for small businesses in two broad industry categories: (1) Information and (2) Administrative and Support, Waste Management and Remediation Services.

SBA increased the revenue-based size standards for 15 industries and retained the current revenue-based size standards for five industries in the North American Industry Classification System (NAICS) Sector 51: Information.  SBA will review the employee-based size standards within this sector at a later date.  As a result of these revisions, the SBA estimates that up to 500 additional firms will become eligible for SBA’s loan and federal procurement programs.

Small Business Size Standards: Information (RIN 3245-AG26)
www.regulations.gov/#!documentDetail;D=SBA-2011-0017-0005

SBA also increased the revenue-based size standards for 37 industries and retained revenue-based size standards for seven industries in the NAICS Sector 56: Administrative and Support, Waste Management and Remediation Services.  SBA will review the employee-based size standards within this sector at a later date.  Up to 2,700 additional firms will become eligible for SBA’s loan and federal procurement programs because of these revisions, according to the SBA..

Small Business Size Standards: Administrative and Support, Waste Management and Remediation Services (RIN 3245-AG27)
www.regulations.gov/#!documentDetail;D=SBA-2011-0018-0023

SBA increases size standards for 58 industries in three sectors

September 28, 2012 by

The U.S. Small Business Administration (SBA) issued three final rules in the Federal Register, effective Oct. 24, 2012, increasing size standards for firms in three North American Industry Classification System (NAICS) Sectors:  Real Estate and Rental and Leasing; Educational Services; and Health Care and Social Assistance.

Size standards define the maximum size a firm can be and still be considered a small business.  The revised standards reflect changes in marketplace conditions and public comments that SBA received to the proposed rules.

New size standards will enable more businesses in these sectors to obtain or retain small business status; will give federal agencies a larger pool of small businesses from which to choose for their procurement programs; and will make more small businesses eligible for SBA’s loan programs.

SBA increased size standards for businesses in 21 industries in the Real Estate and Rental and Leasing Sector.  More than 13,000 additional firms will qualify as small under these new size standards and become eligible for SBA loan and federal procurement programs.

SBA also increased size standards for nine industries for firms in the Educational Services Sector.  More than 1,500 additional businesses will qualify as small under the new size standards and become eligible for SBA loan and federal procurement programs.

Size standards for 28 industries were also increased for firms in the Health Care and Social Assistance Sector.  More than 4,100 additional firms will qualify as small under these new size standards and become eligible for SBA loan and federal procurement programs.

To review the three rules and public comments, go to www.regulations.gov.  Each has a separate RIN number:

  • Real Estate and Rental and Leasing – (RIN 3245-AG28)
  • Educational Services – (RIN 3245-AG29)
  • Health Care and Social Assistance – (RIN 3245‑AG30)

The SBA is reviewing all size standards, and takes into account the structural characteristics of individual industries, including average firm size, the degree of competition, and federal government contracting trends.  This ensures that small business size definitions reflect current economic conditions in those industries.  Under the Small Business Jobs Act of 2010, SBA will continue its comprehensive review of all size standards for the next several years.

The SBA issued a White Paper entitled “Size Standards Methodology” which explains how SBA establishes, reviews and modifies its receipts-based and employee-based small business size standards.  It is available at http://www.sba.gov/size.  For the latest about SBA’s revisions to small business size standards, click on “What’s New with Size Standards.”

For a chart with the changes for specific business sectors, click here.

SBA proposes increases to size standards in utilities, construction, arts, entertainment and recreation categories

July 19, 2012 by

The U.S. Small Business Administration (SBA) is seeking comment on three proposed rules published in the July 18, 2012 Federal Register that would revise the size definitions for small businesses in the Utilities; Construction; and Arts, Entertainment and Recreation sectors.  The proposed revisions reflect changes in marketplace conditions.

The proposed rule for the Utilities sector will revise the size standard for nine industries.   The rule proposes changing six of the industries dealing with electric power generation, distribution and transmission from revenue-based size standards to an employee based size standard of 500 employees.

It would also increase the size standards for the remaining three industries in the Utilities sector from $7 million to $25.5 million for water supply and irrigation systems, $7 million to $19 million for sewage treatment facilities, and $12.5 million to $14 million for steam and air conditioning supply.   SBA estimates as many as 400 additional firms in this sector would become eligible for SBA programs as a result of these revisions.

SBA also proposed increases in size standards for one industry and one sub-industry in the Construction sector.  Specifically, SBA proposed to increase the size standard for Land Subdivision from $7 million to $25 million and from $20 million to $30 million for businesses engaged in Dredging and Surface Cleanup activities.  SBA estimates that more than 400 additional firms will become eligible for SBA’s programs and services, if adopted.

The SBA’s third proposed rule would increase the small business size standards for 17 industries in the Arts, Entertainment and Recreation sector.   As many as 1,450 additional firms could become eligible for SBA’s programs and services if the proposed increases are adopted.

Comments can be submitted on these proposed rules on or before September 17, 2012, at www.regulations.gov, identified by the following RIN numbers:

1.         Proposed Rule:  Small Business Size Standards; Utilities (NAICS Sector 22) (RIN 3245-AG25)

2.         Proposed Rule:  Small Business Size Standards; Arts, Entertainment, and Recreation (NAICS Sector 71) (RIN 3245-AG36)

3.         Proposed Rule:  Small Business Size Standards; Construction (NAICS Sector 23) (RIN 3245-AG37)

You may also mail comments to Khem R. Sharma, Chief, Size Standards Division, 409 3rd St., SW, Mail Code 6530, Washington, DC  20416.

As part of an ongoing review of all size standards, the SBA takes into account the structural characteristics within individual industries, including average firm size, the degree of competition, and federal government contracting trends to ensure that small business size definitions reflect current economic conditions within those industries.  Under provisions in the Small Business Jobs Act of 2010, SBA is expected to be conducting a comprehensive review of all size standards for the next several years.

The SBA says the revisions to the size standards in these sectors will:

  • enable more small businesses to retain their small business status,
  • give federal agencies a larger pool of small businesses to choose from for small business procurement opportunities, and
  • help eligible small businesses benefit from SBA’s loan programs.

An SBA-issued White Paper entitled, “Size Standards Methodology”, which explains how the SBA establishes, reviews and modifies its receipts-based and employee-based small business size standards can be viewed at http://www.sba.gov/size.  For more information about SBA’s revisions to its small business size standards, click on “What’s New with Size Standards” on SBA’s Web site at:  http://www.sba.gov/size.