Original Notice.

     Preproposal statement of inquiry was filed as WSR 03-23-123.

     Title of Rule: WAC 326-20-092, 326-20-094, 326-20-095, 326-20-096 and 326-20-098, small business concern requirements.

     Purpose: Change procedures for implementation of chapter 39.19 RCW related to the change of size standards and industry code designations by converting from the standard industrial classification (SIC) codes to the North American industry classification system (NAICS) codes.

     Statutory Authority for Adoption: RCW 39.19.210.

     Statute Being Implemented: Chapter 39.19 RCW.

     Summary: The Office of Minority and Women's Business Enterprises (OMWBE) has the authority to change size standards and industry code designations. Currently OMWBE uses an old code system no longer used by the federal government. Since OMWBE's certification authority also includes the federal DBE certification program, which includes utilizing the current federal government size standards and industry code designations, OMWBE must maintain two separate size standards and industry code designations for firms certified in both the state and federal programs.

     Reasons Supporting Proposal: Using a single size standard and industry code designation system will streamline the certification process for businesses, state agencies and political subdivisions, and OMWBE staff, reducing processing time size standard confusion between the programs.

     Name of Agency Personnel Responsible for Drafting: Vicky Schiantarelli, 406 South Water, P.O. Box 44160, Olympia, WA 98504-1160, (360) 704-1197; Implementation and Enforcement: Carolyn Crowson, 406 South Water, P.O. Box 44160, Olympia, WA 98504-1160, (360) 753-9679.

     Name of Proponent: Office of Minority and Women's Business Enterprises, governmental.

     Rule is not necessitated by federal law, federal or state court decision.

     Explanation of Rule, its Purpose, and Anticipated Effects: Currently, the office uses two different code systems with different size standards: (1) Standard industrial classification (SIC) codes for the state certification program (using 1997 size standards) and (2) North American industrial classification system (NAICS) codes for the federal DBE certification program (using 2002 size standards). SIC codes have not been revised since 1987. Some industries do not have assigned numbers because they did not come into existence until after 1987. OMWBE has had to create or adapt number(s) for industries that did not exist prior to 1987. The two systems are not similar enough to allow for easy conversion between the systems. SIC codes are lower than NAICS codes (e.g., specialty contractors = $7.0M for SICs and $11.5M for NAICS; A/E = $2.5M for SICs and $4.0M for NAICS). Therefore, confusion exists for staff, businesses, agencies and political subdivisions about which size applies to which program.

     The proposed change to adopt NAICS codes to determine size and small business concerns will accomplish the following:

•	More modern and universal coding system for state certification program that is currently used by the federal and other state governments.
•	A single system to be used for both the state and federal DBE certification programs, reducing confusion and conversion charts.
•	Streamlining process and reducing application processing time for businesses and staff concerning small business concerns.
•	Increasing the net number of certified firms because more businesses will qualify as small business concerns.
•	Current federal DBE size standards already used as the working model.
•	Staff already trained using the federal DBE model.

     Proposal Changes the Following Existing Rules: The analysis to determine a small business concern will remain the same. The change will be come [coming] from changing the actual chart of size standards used to determine what consists the size limit: Changing from SIC codes to NAICS codes for the federal DBE program.

     No small business economic impact statement has been prepared under chapter 19.85 RCW. There is no negative impact to small businesses by increasing the size standards for small business concerns for the state certification program.

     RCW 34.05.328 does not apply to this rule adoption. RCW 34.05.328 (5)(b)(ii), rules relating only to internal governmental operations that are not subject to violation by a nongovernmental party; RCW 34.05.328 (5)(f), rules that set or adjust fees or rates pursuant to legislative standards; and RCW 34.05.328 (5)(g)(ii), a filing or related process requirement for applying to an agency for a license or permit.

     Hearing Location: Seattle, U.S. Small Business Administration, 1200 Sixth Avenue, 17th Floor, Executive Conference Room, on February 11, 2004, at 10:00 a.m. - 1:00 p.m.; at Olympia, OMWBE, 406 South Water Street, Main Conference Room, on February 13, 2004, at 1:30 p.m. - 4:30 p.m.; at Olympia, OMWBE, 406 South Water Street, Main Conference Room, on February 17, 2004, at 5:30 p.m. - 8:30 p.m.; at Vancouver, Washington State Department of Transportation, Southwest Region, Room 124, 11018 N.E. 51st Circle, on February 23, 2004, at 3:00 p.m. - 6:00 p.m.; at Tacoma, Tacoma Housing Authority, 902 South "L" Street, on February 24, 2004, at 5:30 p.m. - 8:30 p.m.; and at Spokane, Business Information Center, U.S. Small Business Administration, 801 West Riverside, on March 2, 2004, at 1:30 p.m. - 4:30 p.m.

     The first hour of each session is a "public information session." The OMWBE rule-making team will give a brief overview of the proposed rule and the public may ask questions of OMWBE rule-making team about the proposed rule during the "public information session." The two hour public hearing immediately follows.

     Assistance for Persons with Disabilities: Contact Tammi Hazlitt by phone (360) 753-9691 or thazlitt@omwbe.wa.gov.

     Submit Written Comments to: Cathy Canorro, Rules Coordinator, Office of Minority and Women's Business Enterprises, P.O. Box 41160, Olympia, WA 98504-1160, fax (360) 586-7079, by March 3, 2004.

     Date of Intended Adoption: April 5, 2004.

January 2, 2004

Carolyn Crowson

Director

OTS-6896.1

AMENDATORY SECTION(Amending WSR 92-11-007, filed 5/11/92, effective 6/11/92)

WAC 326-20-092   Small business concern requirement.   (1) In addition to meeting the ownership and control requirements of chapter 39.19 RCW and these regulations, a business must qualify as a small business concern to be eligible for certification or recertification.

     (a) Except as otherwise provided in WAC 326-20-096 (for certain federal projects), a small business concern is a business which is independently owned and operated, is not dominant in its field of operations, and which does not exceed the size limitations as set forth in the current table of ((Standard Industrial Classification (SIC))) North American Industrial Classification System (NAICS) codes and corresponding industry size standards as ((adopted by the United States Small Business Administration in Title 13 Code of Federal Regulations, Part 121, on file in the office)) set forth in 49 CFR Part 26 and amendments or inflationary adjustments thereof.

     (b) The number of employees or amount of annual receipts listed as the size standard for each ((SIC)) NAICS code indicates the maximum allowed for a business (including its affiliates) to qualify as a small business concern.

     (c) The office's determination of whether a business qualifies as a small business concern shall be, whenever possible, based on criteria that is consistent with the small business requirements defined under section 3 of the Small Business Act, 15 U.S.C. 632, and its implementing regulations, taking into consideration statewide markets.

     (2) A business which exceeds the small business size limits after certification by the office shall be subject to ((decertification)) graduation.

[Statutory Authority: RCW 39.19.030(7). 92-11-007, § 326-20-092, filed 5/11/92, effective 6/11/92. Statutory Authority: Chapter 39.19 RCW. 88-09-047 (Order 88-5), § 326-20-092, filed 4/18/88.]

     (2) In the event the business plans to expand the areas in which it operates, it must notify the office in writing at least thirty calendar days before the effective date of such expansion.

[Statutory Authority: RCW 39.19.030(7). 92-11-007, § 326-20-094, filed 5/11/92, effective 6/11/92. Statutory Authority: Chapter 39.19 RCW. 88-09-047 (Order 88-5), § 326-20-094, filed 4/18/88.]

     (2) Affiliates. Except as otherwise provided in this chapter, businesses are affiliates of each other when either directly or indirectly:

     (a) One controls or has power to control the other; or

     (b) A third party or parties controls or has the power to control both; or

     (c) Such an "identity of interest" exists between or among them that affiliation may be presumed.

     (3) Annual receipts. Where the maximum size standard is set by reference to "annual receipts," a business that exceeds the annual receipts in that standard is not eligible for certification. Annual receipts includes all revenue in whatever form received or accrued from whatever source, including from the sales of products or services, interest, dividends, rents, royalties, fees, or commissions, reduced by returns and allowances. However, the term "receipts" excludes proceeds from sales of capital assets and investments, proceeds from transactions between a concern and its domestic and foreign affiliates, proceeds from payments of notes receivable and accounts receivable, and amounts collected as an agent for another, such as gross bookings on which a commission is earned (in which case only the commission earned would constitute revenue) or such as taxes collected for remittance to a taxing authority.

     (4) Period of measurement.

     (a) The size of a business that has completed three or more fiscal years will be determined by averaging the annual receipts of the business for each of the most recent three years.

     (b) The size of a business that has completed less than three fiscal years will be determined by computing the average of the annual receipts from the time the business was formed as follows: Total revenues compiled over the period divided by the number of weeks, including fractions of a week, multiplied by fifty-two.

     (d) Method of determining annual receipts. Revenue may be taken from the regular books of account of the concern. If the office so elects or the firm has not kept regular books of account or the Internal Revenue Service has found such records to be inadequate and has reconstructed income of the concern, then revenue as shown on the Federal Income Tax return of the concern may be used in determining annual receipts along with other information the office deems relevant.

     (4) Number of employees. Where the size standard is "number of employees" size eligibility requires that the concern may not exceed the number of employees in that standard.

     (a) "Number of employees" means that average employment of the concern, including the employees of its domestic and foreign affiliates, based upon employment during each of the pay periods for the preceding completed twelve calendar months.

     (b) In computing average employment, part-time and temporary employees are counted as full-time employees for each applicable pay period.

     (c) If a concern has not been in business for twelve months, "number of employees" means the average employment of the concern, including its affiliates, during each of the pay periods during which it has been in business.

[Statutory Authority: RCW 39.19.030(7). 92-11-007, § 326-20-095, filed 5/11/92, effective 6/11/92. Statutory Authority: Chapter 39.19 RCW. 88-09-047 (Order 88-5), § 326-20-095, filed 4/18/88.]

     Reviser's note: The typographical errors in the above section occurred in the copy filed by the agency and appear in the Register pursuant to the requirements of RCW 34.08.040.
AMENDATORY SECTION(Amending WSR 92-11-007, filed 5/11/92, effective 6/11/92)

WAC 326-20-096   Size standard.   (1) No business, regardless of its primary ((SIC)) NAICS code, is eligible for certification if it exceeds the largest annual revenue limit contained in ((13 Code of Federal Regulations, Part 121, on file in the office)) 49 CFR Part 26 and any amendments or inflationary adjustments thereof.

     (2) In determining ((what is)) the business's primary industry ((in which an applicant)) (including its affiliates) ((is engaged, primary consideration shall be given to)), the office shall consider the distribution of receipts, employees and costs in the differing industry areas in which the business operated during its most recently completed fiscal year. Other factors (e.g., patents, contract awards, assets) may be considered.

     (3) If the activities of the business encompass two or more ((SIC)) NAICS codes, the first ((SIC)) NAICS code listed in the directory is the primary industry classification of the business.

     (4) A firm which exceeds the small business size limits after certification by the office shall be subject to ((decertification)) graduation.

     (5) For purposes of utilization on projects funded by any operating modal of the ((Federal Highway Administration or under The Surface Transportation and Uniform Relocation Assistance Act of 1987, (P.L. 100-17, or STURAA))) U.S. Department of Transportation the maximum dollar size standard set out in ((STURAA and)) 49 CFR Part ((23)) 26 as may be amended or adjusted for inflation, shall apply, even if the size standard would otherwise be set by reference to number of employees. This standard is a ceiling. Certified businesses are still subject to applicable lower limits on business size as established by the United States Small Business Administration and these regulations.

[Statutory Authority: RCW 39.19.030(7). 92-11-007, § 326-20-096, filed 5/11/92, effective 6/11/92. Statutory Authority: Chapter 39.19 RCW. 88-09-047 (Order 88-5), § 326-20-096, filed 4/18/88.]

[Statutory Authority: RCW 39.19.030(7). 92-11-007, § 326-20-098, filed 5/11/92, effective 6/11/92. Statutory Authority: Chapter 39.19 RCW. 88-09-047 (Order 88-5), § 326-20-098, filed 4/18/88.]

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