Additional Utilities and Construction Firms Become Eligible for SBA Programs

The U.S. Small Business Administration (SBA) issued two final rules in the Federal Register today, revising size standards for firms in two North American Industry Classification System (NAICS) sectors, namely, Utilities (Sector 22) and Construction (Sector 23).

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 its earlier 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.

For industries in Sector 22, Utilities, SBA increased revenue-based size standards for three industries and changed the basis for determining business size from megawatt hours to number of employees in 10 electric power generation, transmission, and distribution industries. SBA retained the current 500 employee size standard for the one remaining industry (NAICS 221210) in the sector. 

The final rule also removes Footnote 1 from SBA’s Table of Size Standards, which stated that a firm was small if it, including its affiliates, was primarily engaged in the generation, transmission, and/or distribution of electric energy for sale and its total electric output for the preceding fiscal year did not exceed 4 million megawatt hours.

More than 400 additional firms will qualify as small under these new size standards for Utilities and become eligible for SBA’s loan and federal procurement programs. 

The SBA increased two size standards in Sector 23 (Construction) and retained the current size standards for the remaining industries in the sector. Specifically, SBA increased the size standards from $7 million to $25 million for firms in the Land Subdivision industry, and from $20 million to $25.5 million for businesses engaged in Dredging and Surface Cleanup activities, which is an “exception” to the size standard for NAICS 237990, Other Heavy and Civil Engineering Construction. 

In its originally proposed rule, SBA sought comments on eliminating or otherwise modifying Footnote 2, which requires that, to qualify as small, a firm must perform at least 40 percent of the volume dredged with its own equipment or equipment owned by another small dredging business. The SBA reconsidered, and based on those comments, the Agency is keeping Footnote 2 without change.

Nearly 500 additional firms will qualify as small under the new construction size standards and become eligible for SBA’s loan and federal procurement programs.

The new small business size standards will be effective January 22, 2014.  To review the rules and public comments, go to www.regulations.gov. Each final rule has a separate RIN number, specifically:

• Sector 22, Utilities – (RIN 3245-AG25).
• Sector 23, Construction – (RIN 3245-AG37).

The SBA is reviewing size standards by taking 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 and market conditions in those industries. The Small Business Jobs Act of 2010 requires SBA to review all size standards at least every five years. 

SBA issued a “Size Standards Methodology” White Paper, which explains how SBA establishes, reviews and modifies its small business size standards. This paper is available online at http://www.sba.gov/size.  Also available on this site is the latest about SBA’s revisions to small business size standards.  For details click on the article “What’s New with Size Standards.”