Effective January 7, 2013, the U.S. Small Business Administration (SBA) will apply new standards for determining which businesses are small businesses in the North American Industrial Classification System (NAICS) Sector 56 – Administrative and Support, Waste Management, and Remediation Services.

Sector 56 lists multiple types of businesses involved in regulated environmental activities, including solid and hazardous waste collection, hazardous waste treatment and disposal, solid waste combustors and incinerators, remediation services, and materials recovery facilities.  The new standards will increase the number of businesses the SBA defines as small. 

Federal eligibility

Business size determines eligibility for federal small business assistance programs.  SBA’s standards use two primary measures of business size: average annual receipts and number of employees.  SBA’s definitions of small businesses comprise 41 different size standard levels covering 1,141 NAICS industries and 18 subindustry activities called exceptions.  Of these size standard levels, 31 are based on average annual receipts, 7 are based on number of employees, and 3 are based on other measures. 

The SBA last conducted a comprehensive review of size standards during the late 1970s and early 1980s.  Since then, most reviews of size standards have been limited to a few specific industries in response to requests from the public and federal agencies.  The SBA says it recognizes that changes in industry structure and the federal marketplace since the last overall review have rendered existing size standards for some industries no longer supportable by the current data.  Also, in September 2010, President Obama signed the Small Business Jobs Act, which directs the SBA to conduct a detailed review of all size standards and make appropriate adjustments to reflect market conditions.  Instead of reviewing all size standards at once, the SBA has elected to review groups of related industries on a sector-by-sector basis.

Current revisions

Following are the receipts-based changes for environmental industries in SBA’s current action:

Environmental remediation

One exception to Remediation Services (NAICS Code 562910) is Environmental Remediation Services, which has a 500-employee size standard instead of a receipt-based standard.  The SBA notes that one commenter on the proposed standards believed the standard should be switched to receipt-based because companies with under 500 employees bring in hundreds of millions of dollars basically by subcontracting out their noncore activities.  According to the commenter, this creates a market disadvantage for smaller environmental remediation service companies (e.g., those with less than 100 employees or $50 million in revenue).  The commenter urged the SBA to remove the 500-employee size standard and replace it with a $35.5 receipt-based standard. 

The SBA denied the request.  Primarily, the SBA noted that in contrast to remediation services, environmental remediation services cover a “much more sophisticated, multidisciplinary, and large-scale” range of activities.  The SBA believes that applying a $35.5 receipt-based standard to this industry will result in a pool of companies that may lack the capabilities to complete government jobs and hamper critical environmental remediation programs.

SBA’s final rule on small business size standards was published in the December 6, 2012, FR.