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Federal Register / Vol. 86, No. 209 / Tuesday, November 2, 2021 / Proposed Rules size standards in terms of qualifying for Federal small business programs, including Federal contracts set aside for small businesses and SBAs loan programs. Similarly, the proposed change in the averaging period for receipts from 3 years to 5 years will also impact a substantial number of businesses in the SBA Business Loan, Disaster Loan, and SBIC programs.
Immediately below, SBA sets forth an initial regulatory flexibility analysis IRFA of proposed rule to address the following questions: 1 What is the need for and objective of the rule?; 2
What is SBAs description and estimate of the number of small businesses to which the rule will apply?; 3 What are the projected reporting, record-keeping, and other compliance requirements of the rule?; 4 What are the relevant Federal rules that may duplicate, overlap, or conflict with the rule?; and 5 What alternatives will allow the Agency to accomplish its regulatory objectives while minimizing the impact on small businesses?

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1. What is the need for and objective of the rule?
First, section 863 of the NDAA 2021, Public Law 116283, changed the averaging period for SBAs employeebased size standards from 12 months to 24 months. The intent of this proposed rule is to implement Public Law 116
283 by amending 13 CFR 121.106 such that a concern would average its employees over all pay periods in the preceding completed 24 months.
Second, in 2018, Public Law 115324
amended section 3a2CiiII of the Small Business Act by modifying the period for calculating average annual receipts for prescribing size standards for business concerns in services industries by an agency without separate statutory authority to issue size standards from 3 years to 5 years. In a final rule published December 5, 2019
84 FR 66561, SBA implemented Public Law 115324 by making changes to its receipts-based size standards for all SBA
programs except the Business Loan and Disaster Loan Programs. This proposed rule would extend the changes to SBAs receipts-based size standards for the Business Loan, Disaster Loan, and SBIC
Programs.
2. What are SBAs description and estimate of the number of small businesses to which the rule will apply?
This proposed rule applies to all small businesses that are subject to either an employee-based or a receiptsbased size standard. Based on the 2012
Economic Census special tabulations, 2012 County Business Patterns Reports,
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and 2012 Agricultural Census tabulations, of a total of 680,266 firms in all industries with employee-based size standards to which this proposed rule will apply, 657,942 or about 96.7
percent are considered small under the 12-month employee average. Of 152,450
total concerns in SAM 2019 to which an employee-based size standard will apply, about 133,958 or 87.9 percent were small in at least one NAICS
industry with an employee-based size standard. Similarly, based on the data from FPDSNG for fiscal year 2019, about 39,700 unique firms in industries subject to employee-based size standards received at least one Federal contract in 2019, of which 85.3 percent, or 33,867 were small.
Based on the same data sources listed above, of a total of 7.2 million firms in all industries with receipts-based size standards to which this final rule will apply, 6.9 million or about 96 percent are considered small under the 3-years receipts average. Of 334,990 total concerns in SAM 2019 to which a receipts-based size standard will apply, 292,454 or 87.3 percent were small in at least one NAICS industry with a receipts-based size standard.

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4. What are the relevant Federal rules which may duplicate, overlap or conflict with the rule?
Under section 3a2C of the Small Business Act, 15 U.S.C. 632a2C, Federal agencies must use SBAs size standards to define a small business, unless specifically authorized by statute to do otherwise. In 1995, SBA published in the Federal Register a list of statutory and regulatory size standards that identified the application of SBAs size standards as well as other size standards used by Federal agencies 60 FR 57988
November 24, 1995. SBA is not aware of any Federal rule that would duplicate or conflict with establishing size standards.
However, the Small Business Act and SBAs regulations allow Federal agencies to develop different size standards if they believe that SBAs size standards are not appropriate for their programs, with the approval of SBAs Administrator 13 CFR 121.903. The Regulatory Flexibility Act, 5 U.S.C.
6013, authorizes an Agency to establish an alternative small business definition, after consultation with the Office of Advocacy of the U.S. Small Business Administration.

3. What are the projected reporting, record-keeping and other compliance requirements of the rule?

5. What alternatives will allow the Agency to accomplish its regulatory objectives while minimizing the impact on small entities?

The proposed rule changes existing reporting or record-keeping requirements for small businesses. To qualify for Federal procurement and a few other programs, businesses are required to register in SAM and to selfcertify that they are small at least once annually. Therefore, businesses opting to participate in those programs must comply with SAM requirements. There are no costs associated with SAM
registration or certification. The change in the calculation of employees from a 12-month averaging period to a 24month averaging period may result in some redistribution of Federal contracts between businesses gaining or extending small status and large businesses, and between businesses gaining or extending small status and other existing small businesses.
However, it would have no impact on the overall economic activity since the total Federal contract dollars available for businesses to compete for will not change. Since the change in the calculation of annual average receipts in this proposed rule only applies to SBA
loan programs, this will have no impact on Federal contracting and associated record-keeping requirements.

By law, SBA is required to develop numerical size standards for establishing eligibility for Federal small business assistance programs. Other than varying size standards by industry and changing the size measures or changing a measurement period, no practical alternative exists to the systems of numerical size standards. As stated elsewhere, the objective of this final rule is to change SBAs regulations on the calculation of business size in terms of average number of employees to implement Public Law 116283 for all SBA programs and average annual receipts to implement Public Law 115
324 for the SBAs Business Loan, Disaster Loan and SBIC programs.
This rule is expected to affect a substantial number of small entities, but the effects are not expected to be significant. However, to mitigate any unintended negative impacts of a 5-year averaging period on small businesses and to allow small businesses to continue to use the 3-year receipts average, in this proposed rule, SBA is allowing applicants in Business Loan, Disaster Loan and SBIC programs to elect to calculate average annual receipts using either a 3-year averaging period or a 5-year averaging period.

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