Background and Analysis:
On September 27, 2010, President Barack Obama signed the Small Business Jobs Act of 2010, which, among other things, directs the Small Business Administration (SBA) to conduct a review of all size standards and to make appropriate adjustments to reflect market conditions.  The last comprehensive review of size standards occurred in the early 1980s and the last size standards review of landscape architecture was performed in 1998.

As part of this comprehensive review, SBA proposed a change to its size standards for all professions in the North American Industry Classification System (NAICS) Sector 54, the professional, scientific and technical services industries, including architecture, landscape architecture, engineering, planning, and a host of other professions. Under the proposed rule, SBA recommended that small landscape architecture firms be capped at $19 million instead of the current $7 million. 

For purposes of the new size standards calculations, SBA grouped architecture, engineering, landscape architecture, and planning together because they believe there is a tremendous overlap in the type of work that the professions perform for federal procurement projects. With this analysis in mind, SBA recommends that all three professions be grouped together with a common size standard of $19 million. 

Below are the current size standards, the proposed common size standards, and the calculated industry specific size standards in millions of dollars.

 Profession                          Current              Proposed     Calculated Industry Specific  

Landscape architecture           $7                     $19               $5

Architecture                              $4.5                  $19               $7

Engineering                               $4.5                  $19               $25.5

ASLA heard from a number of members and firms and learned that the vast majority of them believe that SBA’s proposed new standard of $19 million is too high and would have a devastating impact on their ability to compete for any small business opportunities and could decimate their businesses.  Also, according to the most recent Economic Census (U.S. Census Bureau), approximately 99 percent of landscape architecture firms operating in the United States have annual receipts less than ten million dollars. With only about thirty-three landscape architecture firms operating with revenue more than $10 million, increasing the size cap to $19 million would only benefit a handful of firms.  

ASLA submitted comments to the SBA that opposes the agency’s recommendation of increasing the cap on landscape architecture firms to $19 million and instead recommends that SBA maintain the current $7 million threshold. ASLA urged SBA not to group the landscape architecture profession with other design professions who may perform similar work, including the professions of architecture and engineering and instead to perform size standards analysis based on the specific data from each profession.  Finally, ASLA urged SBA to take any necessary steps to exclude “pass through” payments to third party subcontractors in a landscape architecture firm’s annual receipts.  

Current Status:
On February 11, 2012, the Small Business Administration (SBA) issued a final rule for size standards affecting the North American Industry Classification System (NAICS) Sector 54, the professional, scientific and technical services industries, including architecture, landscape architecture, engineering, planning, and a host of other professions. As recommended by ASLA, the final rule will maintain the current $7 million threshold to be considered a small landscape architecture firm. 

The final rule increases the size standard for architecture services to $7 million and $14 million for engineering services.  The rule is effective March, 2012.    In future rulemakings ASLA will continue to work with SBA to ensure that agency does not increase small business size standards for the landscape architecture profession.

Resources:

•    SBA’s Size Standards: Professional, Technical, and Scientific Services Final Rule, February 11, 2012.

·    SBA’s Proposed National Rulemaking to Increase Size Standards for Professional, Scientific and Technical Services (Sector 54) 

·         SBA’s Size Standards

·         Subcommittee Hearing: “Professional Services: Proposed Changes to the Small Business Size Standards,” May 5, 2011 U.S. House of Representatives Small Business Committee’s Subcommittee on Economic Growth, Capital Access and Tax Hearing