Final size standards for NAICS sector 54 reflect SBA’s traditional concern for the smallest businesses.

Standards will increase for 34 industries and three sub-industries in sector 54, professional, scientific and technical services, and one related industry in NAICS Sector 81.

In several instances, SBA bowed to industry objections and changed the standards it proposed last March. It doubled the standard for NAICS 541990, other professional, scientific and technical services, to $14 million. It further increased the size standards for accounting firms, while reducing its proposal for architects and engineers.

However, it declined to increase the proposed $25.5 million standard for most IT services. (See the full list on the home page.)

SBA estimates about 8,350 additional firms will become eligible for small business programs as a result of the changes, 1,000 fewer than under the March 2011 proposal. The new standards are effective March 12.

SBA said more than 95% of businesses in NAICS 54 qualify as small under both the old and new size standards.

NAICS Industry Group 5415, Information Technology Services; and NAICS 811212, Computer and Office Machine Repair and Maintenance.

SBA proposed raising the $25 million standard only to $25.5 million, and that is unchanged in the final rule. Most commenters wanted $30 million to $35.5 million.

SBA responded: “[I]f $35.5 million were used as the common size standard for the entire group, as suggested by [one trade] association, more than 300 otherwise large firms would qualify as small in other NAICS codes, possibly hurting many other legitimate small businesses in those industries…. “SBA recognizes the challenges many mid-sized businesses face in the Federal market when they outgrow a size standard, but SBA is also very concerned that ‘smaller’ small businesses may not be able to compete effectively with ‘larger’ small businesses for Federal small business contracts if size standards are too large.”

The agency said a larger standard is not justified by the data. It said more than 92% of firms in this industry group have fewer than 20 employees.

NAICS 541990, All Other Professional, Scientific, and Technical Services.

After originally proposing no increase in the $7 million standard, SBA decided to double the standard to $14 million. The agency described this as a “catch-all” category lumping together various lines of business. A new analysis of data found that small firms won only 9% of contract dollars under this NAICS code, so SBA concluded that an increase was warranted.

NAICS Industry Group 5412, Accounting, Tax Preparation, Bookkeeping and Payroll Services; NAICS 541211, Offices of Certified Public Accountants; and NAICS 541219, Other Accounting Services.

SBA proposed $14 million. Two associations representing accountants presented new data to support a $19 million size standard for NAICS 541211 and NAICS 541219. Although the industry groups urged a $25 million standard, SBA adopted $19 million.

NAICS Industry Group 5413, Architectural, Engineering and Related Services.

SBA proposed $19 million, up from $4.5 million, for all industries in this group, but agreed to a lower figure following hundreds of comments.

The majority of comments from architects and engineers said $19 million would allow too many larger firms to compete with the smallest ones. Most of the commenters said architectural firms and engineering firms should not be grouped together in a single standard.

After review, SBA is increasing the current $4.5 million size standard to $7 million for NAICS 541310, Architectural Services, and retaining the current $7 million size standard for NAICS 541320, Landscape Architectural Services. The agency has decided to increase the size standard for NAICS 541330, engineering services, to $14 million rather than the $19 million that was proposed.

Some industries, such as architects and engineers, pass through a large portion of their receipts to subcontractors. They urged SBA to exclude subcontracting costs in calculating receipts. SBA said the Small Business Act provides that size standards must be based on “average annual gross receipts.”

SBA rejected the idea of calculating average annual receipts over five years rather than three. It said that would allow larger companies to retain their small business eligibility longer and hurt smaller firms.

The agency rejected recommendations for tiered size standards because of their complexity: “[N]ew small business procurement goals would need to be established for each tier to ensure that contracting officers did not structure contracts for only the largest tiers, and this in turn would create more burdensome reporting requirements than those that currently exist.”

SBA also rejected establishing separate standards for federal procurement, larger than those for other federal small business programs. Separate standards existed until the 1980s, but the agency said they were too complicated. “SBA is also concerned that separate standards for Federal contracts, especially if they are appreciably higher than the current size standards, may cause significant disadvantage to very small businesses when they compete for Federal small business set-aside contracts.”