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Federal Register / Vol. 86, No. 209 / Tuesday, November 2, 2021 / Proposed Rules
small business status in multiple industries. For purposes of this analysis, an impacted firm is defined as one that
would be impacted by the change in terms of gaining, regaining, extending, or losing small business status in at least
one industry with a receipts-based size standard.

TABLE 4DISTRIBUTION OF BUSINESS CONCERNS SUBJECT TO RECEIPTS-BASED SIZE STANDARDS BY NUMBER OF
NAICS CODES
Total firms in 2019 SAM with at least one receipts-based NAICS
code
Number of NAICS codes
Count
Matched firms between 2019
and 2016 SAM
Count
%

%

1 NAICS code
2 to 5 NAICS codes
6 to 10 NAICS codes
>10 NAICS codes

145,267
120,078
40,595
29,050

43.4
35.8
12.1
8.7

79,701
68,168
24,461
19,965

41.4
35.4
12.7
10.4

Total

334,990

100.0

192,295

100.0

Note: A business concern is defined in terms of a unique local vendor DUNS number.

A central premise of Public Law 115
324 is that a 5-year annual receipts average as opposed to a 3-year annual receipts average would enable some mid-size businesses who have recently exceeded the size standard to regain small business status and some advanced small businesses close to exceeding the size standard to retain their small business status for a longer period. However, this premise would only hold true when businesses annual revenues are rising. When businesses annual revenues are declining, due to economic downturns or other factors, the 5-year annual receipts average could be higher than the 3-year annual receipts average, thereby causing small businesses close to their size standards to lose their small business status sooner. To mitigate such negative impacts on small businesses, SBA
proposes, in consideration of public comments on the prior proposed rule and the results from its own analysis, to permit businesses in the Business Loan, Disaster Loan, and SBIC Programs to use either a 3-year average or a 5-year average for calculating average annual receipts for the purposes of qualifying as a small business.

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B. Impacts on Businesses From Proposed Changes in Calculation of Employees and Receipts for Size Standards 1. Impacts on Businesses From Changing the Averaging Period for Employees From 12 Months to 24
Months By comparing the approximated 24month employee average with the current employee-based size standard for each of the 128,599 matched business concerns in each NAICS code subject to an employee-based size standard, SBA identifies the following 4
possible impacts from changing the
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averaging period for employees from 12
months to 24 months:
i. The number of mid-size businesses that have exceeded the size standard and would regain small business status in at least one NAICS industry with an employee-based size standard i.e., 12month average > size standard 24month averageexpansive impact;
ii. The number of advanced small businesses within 10 percent below the size standard that would have their small business status extended for a longer period in at least one NAICS
industry with an employee-based standard 24-month average < 12-month average size standard and 0.9size standard < 12-month average size standardexpansive impact;
iii. The number of currently small businesses that would lose their small business status in at least one NAICS
industry subjected to an employeebased size standard i.e., 12-month average size standard < 24-month averagecontractive impact; and iv. The number of advanced small businesses within 10 percent below the size standard that would have their small status shortened in at least one NAICS industry subject to an employeebased standard 12-month average < 24month average size standard and 0.9size standard < 12-month average
size standardcontractive impact.
In this proposed rule, SBA is changing the period for calculation of average employees for all of its employee-based size standards from 12
months to 24 months. The purpose of Public Law 116283 is to allow small businesses more time to grow and develop competitiveness and infrastructure so that they are better prepared to succeed under full and open competition once they outgrow the size threshold. However, as stated previously, a longer 24-month averaging
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period may not always and necessarily provide relief to every small business concern. As discussed previously, when monthly employees are declining, the 24-month average would be higher than the 12-month average, thereby ejecting some advanced small businesses out of their small business status sooner or rendering some small businesses under the 12-month average not small immediately.
As discussed earlier, the change in the averaging period for employees from 12
months to 24 months results in four different types of impacts on small businesses: i Enabling current large or mid-size businesses to gain small business status impact i; ii enabling current advanced small businesses to lengthen their small business status impact ii; iii causing current small businesses to lose their small business status impact iii; and iv causing current small businesses to shorten their small business status impact iv. Table 5, Percentage Distribution of Impacted Firms with Employee Based Size Standards by the Number of NAICS
Codes, below, provides these results based on the 2019 SAM2018 SAM
matched firms.
It is highly notable that the distribution of impacted firms by the number of NAICS codes, as shown in Table 5, is very different as compared to a similar distribution based on the overall matched and total 2019 SAM
data see Table 2, especially with respect to firms with only one NAICS
code and those with more than 5 NAICS
codes. For example, about 45 percent of all firms in the overall data were associated with only one NAICS code, as compared only about 20 percent among impacted firms. Similarly, firms with more than 5 NAICS codes accounted for about 1314 percent of all firms in the original data, as compared
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