OMB Supporting Statement Part A 3.5.18_Census response

U.S. Department of Commerce

U.S. Census Bureau

OMB Information Collection Request

Annual Business Survey

OMB Control Number 0607-XXXX

Supporting Statement Part A. – Justification

1. Necessity of Information Collection

In an effort to improve the measurement of business dynamics in the United States, the Census Bureau plans to conduct the Annual Business Survey (ABS). The ABS is a new survey designed to combine Census Bureau firm-level collections to reduce respondent burden, increase data quality, reduce operational costs, and operate more efficiently. The ABS replaces the five-year Survey of Business Owners (SBO) for employer businesses, the Annual Survey of Entrepreneurs (ASE), and the Business R&D and Innovation for Microbusinesses (BRDI-M) surveys. The ABS also replaces the Innovation part of the Business R&D and Innovation Survey (BRDIS). ABS estimates will include the number of firms, sales/receipts, annual payroll, and employment by gender, ethnicity, race, and veteran status as well as R&D and Innovation and various other relevant topics. The ABS will be conducted jointly by the National Center for Science and Engineering Statistics (NCSES) within the National Science Foundation (NSF) and the Census Bureau, planned for five reference years ¹(2017 – 2021).  Title 13 United States Code, Sections 8(b), 131, and 182, Title 42 United States Code, Section 1861-76 (National Science Foundation Act of 1950, as amended), and Section 505 within the America COMPETES Reauthorization Act of 2010 authorize this collection. Sections 224 and 225 of Title 13 United States Code requires response from sampled firms.

The ABS includes all nonfarm employer businesses filing Internal Revenue Service (IRS) tax forms as individual proprietorships, partnerships, or any type of corporation, and with receipts of $1,000 or more. The ABS plans to sample approximately 850,000 employer businesses in the benchmark survey year 2017. The large sample size is needed to produce detailed statistics by owner demographics. Results from the large sample size should allow the Census Bureau to produce tabulations by detailed NAICS (2-6 digit), detailed geography (US, state, metropolitan statistical area (msa), county, and economic place), and detailed race (i.e. Chinese, Filipino, Japanese, Samoan, etc.). In the continuing annual years 2018-2021, the sample size will be approximately 300,000 employer businesses to reduce the burden on the respondents. The smaller sample size will provide summary statistics by owner demographics. Results from the smaller sample size should allow the Census Bureau to produce more frequent data, however the data provided will not be as detailed. For 2018-2021 tabulations plans include data by 2 digit NAICS, US, state, and msa, and will not include detailed race groups. The Census Bureau uses administrative data to estimate the probability that a firm is minority- or women-owned. Each firm is then placed in one of nine frames for sampling. The sampling frames are; American Indian, Asian, Black or African American, Hispanic, Non-Hispanic White Men, Native Hawaiian and Other Pacific Islander, Some Other Race, Publicly Owned, and Women. The sample is stratified by state, industry, and frame. Certain companies are selected with certainty based on volume of sales, payroll, number of paid employees or NAICS. All certainty cases are sure to be selected and represent only themselves.

The ABS is designed to allow for incorporating new content each survey year based on topics of relevance. Each year the new module of questions is submitted to the Office of Management and Budget (OMB) for approval. Topics for the 2017 ABS include: Owner & Business Characteristics; R&D from microbusiness; Innovation; and Technology.

The ABS collection is electronic only. Those selected for the survey receive an initial letter informing the respondents of their requirement to complete the survey as well as instructions on accessing the survey. The 2017 ABS initial mail is scheduled for June 2018. Responses will be due approximately 40 days from initial mail. Respondents will receive a due date reminder approximately one week before responses are due. Additionally, there will be two follow-up letter mailings to all nonrespondents after the due date. Select nonrespondents may receive a certified mailing for the second follow-up if needed. Closeout of mail operations for reference year 2017 is scheduled for December 2018. Upon the close of the collection period, the response data will be processed, edited, reviewed, tabulated, and released publicly.

2. Needs and Uses

Statistics from the ABS will be used by government program officials, industry organization leaders, economic and social analysts, business entrepreneurs, and domestic and foreign researchers in academia, business, and government. Estimates produced on owner demographic data may be used to assess business assistance needs, allocate available program resources, and create a framework for planning, directing, and assessing programs that promote the activities of disadvantaged groups; to assess minority-owned businesses by industry and area and to educate industry associations, corporations, and government entities; to analyze business operations in comparison to similar firms, compute market share, and assess business growth and future prospects. Estimates produced on research and development and innovation may be used to compare R&D costs across industries, determine where R&D activity is conducted geographically, and identify the types of businesses with R&D; to contribute to the Bureau of Economic Analysis (BEA) system of national accounts; to increase investments in research and development, strengthen education, and encourage entrepreneurship; and to compare business innovation in the United States to that of other countries, including those in the European Union.

Additionally, the data will help provide insight into the technology sector based on how businesses respond to questions about technology usage and approximate costs of technology usage.

Historical ASE and SBO data have been widely used by private firms and individuals to evaluate their own businesses and markets. The ABS will be able to provide most of the same continuity as previous statistics, with enhanced content, to provide a more comprehensive view of domestic employer businesses, their owners and corresponding characteristics and activities. However, the ABS will exclude nonemployer businesses. Additional examples of data use include:

• The Small Business Administration (SBA) and the Minority Business Development Agency (MBDA) to assess business assistance needs and allocate available program resources.

• Local government commissions on small and disadvantaged businesses to establish and evaluate contract procurement practices.

• Federal, state and local government agencies as a framework for planning, directing and assessing programs that promote the activities of disadvantaged groups.

• The National Women’s Business Council to assess the state of women’s business ownership for policymakers, researchers, and the public at large.

• Consultants and researchers to analyze long-term economic and demographic shifts, and differences in ownership and performance among geographic areas.

• Individual business owners to analyze their operations in comparison to similar firms, compute their market share, and assess their growth and future prospects.

Information quality is an integral part of the pre-dissemination review of information disseminated by the Census Bureau (fully described in the Census Bureau’s Information Quality Guidelines) at http://www.census.gov/quality/guidelines/index.html.  Data quality is also integral to information collections conducted by the Census Bureau and is incorporated into the clearance process required by the Paperwork Reduction Act.

3. Use of Information Technology

The ABS is collected via an electronic reporting system only. Businesses are provided an initial letter with log-in information to access the secure electronic reporting system known as the Centurion – Internet Data Collection System. The respondent navigates through the electronic reporting system by responding to each screen presented and selecting ‘save and continue’. Skip patterns are coded throughout the system to ensure respondents only read and respond to questions pertaining to their specific owner and business characteristics. In addition, certain businesses will be pre-identified to skip portions of the survey to decrease respondent burden. Respondents will have access to the questionnaire prior to logging in (see attachments A & B). Once a respondent has completed the online survey, a PDF copy of the responses may be printed or saved for business records. The electronic reporting system has built-in edits that give respondents the opportunity to verify their responses. The use of built-in edits ensures consistency among data received from all respondents. The electronic reporting system saves respondents’ progress and allows them to return later to complete the survey. The electronic reporting system also generates an error page prior to submission that indicates if a respondent needs to revisit a page to make a correction.

By implementing an electronic-only collection, the Census Bureau reduces the cost of mailing this annual survey. Additionally, electronic responses yield higher quality response data by utilizing edits built into the electronic reporting system to decrease manual edits when the data are received and processed ultimately leading to cost savings and increased data quality.

4. Efforts to Identify Duplication

The ABS will exclude certain businesses from receiving a portion of the survey that they will receive on another Census Bureau survey (Business R&D Survey – BRDS). Additionally, the ABS replaces the SBO, ASE and BRDI-M surveys. Those surveys will no longer be collected separately and henceforth collected as the ABS. The Census Bureau consulted with NSF’s National Center for Science and Engineering Statistics to remove duplication of questions from the innovation part of the BRDS. ABS replaces the innovation part of the BRDS.

There are a number of lists identifying women-, minority-, and veteran-owned businesses publicly available; however, these lists are comprised of self-designated firms and are not comprehensive.

5. Minimizing Burden

The ABS uses the following methods to minimize the burden:

• Predetermining the likelihood that a business is minority- or women-owned for sampling: Several sources of information are used to stratify the universe. Administrative data from the Social Security Administration (SSA), American Community Survey, and Decennial Census, and lists of minority- and women-owned businesses published in syndicated magazines, located on the Internet, or disseminated by trade or special interest groups are used to identify individual proprietorships that are potentially owned by women or minorities; then this information is used to stratify the universe.

• Predetermining employment to determine respondents’ form path: Based on employment maintained in the Business Register, businesses with more than 10 employees will not be asked questions on research and development because those businesses’ data will continue to be collected from the BRDS.

• Survey instrument design for better user experience: New questions have been cognitively tested through personal interviews. The remaining questions have been tested and fielded previously with the same population. In addition, the electronic reporting instrument includes skip patterns throughout so that respondents will only read and answer questions pertaining to their specific owner and business characteristics.

• Exclusion of Nonprofits to reduce their burden: The ABS universe is matched to publicly available datasets from the IRS. This universe identifies nonprofit organizations whose ownership by gender, ethnicity, race, and veteran status cannot be determined. Businesses identified as nonprofit organizations do not receive a request to respond to the ABS.

6. Consequences of Less Frequent Collection

The ABS will improve the measurement of business dynamics in the United States and expand availability of federal economic statistics in the areas of owner demographics, entrepreneurship, innovation, R&D and technology. A less frequent collection would impact government agencies’ access to information used to monitor and maintain assistance programs for women-, minority-, and veteran-owned businesses.

7. Special Circumstances

There are no special circumstances.

8. Consultations Outside the Agency

The Census Bureau has collaborated with the National Center for Science and Engineering Statistics, the Ewing Marion Kauffman Foundation, the Small Business Administration, the Minority Business Development Agency (MBDA), and other agencies to implement a robust and effective program.

The National Center for Science and Engineering Statistics has had extensive consultation outside the agency in preparation for the various sections/modules included on the Annual Business Survey and its predecessor surveys including meetings with data users, expert panels, cognitive interviews and debriefings.

In preparation for the Microbusiness Innovation Science and Technology Survey (MIST), the model for the Micro-Business R&D section of, and multiple other questions included in, the ABS, NCSES held a one-day workshop (September 2010) for prospective data users of R&D and innovation-related data in order to gain a better understanding on data user needs, to understand how microbusiness data would be used, and to obtain guidance on priorities and strategies for content to be included in the survey. The data users included academics, government employees and other stakeholders.

Following the development of a draft MIST questionnaire, NCSES convened an expert panel (February 2012) of academics and other stakeholders to provide input and feedback to NCSES on the development of the MIST survey. Panel members reacted to the draft survey questionnaire and discussed issues encountered in the earlier testing, such as questions on innovation and defining the number of employees.

The MIST questionnaire was revised based on findings from the expert panel. Cognitive interviews (November 2011 – May 2012) were conducted with 38 small businesses (conducted over six rounds to allow a process of revision and retesting of the questionnaire) and focused primarily on the content of the questionnaire. Following the MIST pretest conducted for NCSES by Westat, 20 debriefing interviews (Fall 2012) were conducted with pretest respondents.

It was during this period that NCSES started a three-phase study focusing on innovation measurement. Early stage scoping interviews were conducted with 23 medium to large businesses (July to October 2012) to support additional survey question development, to explore respondents’ perceptions of innovation and the Oslo Manual: Guidelines for Collecting and Interpreting Innovation Data (OECED/Eurostat: 2005) survey concepts, to understand the language they use to describe these subjects, and the extent to which related data are contained in company records. Interviewers were conducted with academic researchers (October to December 2014) to identify: the concepts, indicators, and data sources academic researchers are using to measure business innovation, the limits and challenges of these data, and whether the Oslo Manual definitions and metrics for innovation are useful and relevant to innovation research. The purpose of the two-day Innovation Metrics Panel Meetings (December 2014) was to solicit input from federal, state and other policymakers about the innovation metrics and data that are helpful from a policy design and evaluation perspective, as well as to complement and enhance the understanding of innovation and its activities.

Another expert panel (June 2015) was held to identify and consider new avenues for refining, expanding, and reshaping the national innovation data NCSES collects in order to better inform public and private sector decision makers as they address the innovation policy issues before them.

After the MIST pilot (2015), 20 debriefing interviews were conducted to understand general reactions to the survey, evaluate content of the questionnaire, such as learning whether and why businesses made errors in some of their responses (e. g., based on question misinterpretation or lack of knowledge), effectiveness of the contact strategies, what motivated businesses to respond and for the non-respondents why they did not respond. The MIST questionnaire became the Microbusiness Research and Development and Innovation Survey (MBRDIS - 2016). The MBRDIS questionnaire was integrated into several sections of the ABS.

In addition to the work previously completed, 20 cognitive interviews (Summer 2017 – see attachment F) were conducted to test a draft module of 13 innovation questions, to explore relevance and comprehension of the module content for the population of U.S. businesses. The objective was to assess respondent interpretation of the questions, relevance of the content, feasibility of response, and appropriateness of the response options. Currently, debriefing interviews are being conducted with MBRDIS respondents.

The Census Bureau consulted the following officials and agencies regarding content for the ABS:

John Jankowski, Program Director

National Science Foundation

National Center for Science and Engineering Statistics

2415 Eisenhower Avenue

Alexandria VA, 22314

Audrey Kindlon, Survey Statistician

National Science Foundation

National Center for Science and Engineering Statistics

2415 Eisenhower Avenue

Alexandria VA, 22314

Dr. Alicia M. Robb, Senior Research Fellow (former)

Ewing Marion Kauffman Foundation

59 Driftwood Court

San Rafael, CA 94901

Arnobio Morelix, Senior Research Analyst & Program Officer (former)

Ewing Marion Kauffman Foundation

4801 Rockhill Road

Kansas City, MO 64112

Dr. Robert W. Fairlie, Professor

University of California Santa Cruz

Department of Economics, Engineering 2 Building

1156 High Street

Santa Cruz, CA 95064-1077

Miriam Segal, Research Analyst (former)

Small Business Administration

Office of Advocacy

409 3rd St, SW
Washington, DC 20416

Brian Headd, Economist

Small Business Administration

Office of Advocacy

409 3rd St, SW
Washington, DC 20416

Patrick Delehanty, Acting Director of Economic Research

Small Business Administration

Office of Advocacy

409 3rd St, SW
Washington, DC 20416

Joseph Sobota, Assistant Chief Counsel

Small Business Administration

Office of Advocacy

409 3rd St, SW
Washington, DC 20416

Ester Morales, Executive Director

National Women’s Business Council

409 Third Street, SW, 5^th Floor

Washington, DC 20416

Delores Rowen, Research Manager

National Women’s Business Council

409 Third Street, SW, 5^th Floor

Washington, DC 20416

Patricia Tomczyszyn, Public Affairs Specialist

Minority Business Development Agency

1401 Constitution Ave N.W.
Washington, DC 20230

A presubmission notice was published in the Federal Register, Vol. 82, No. 150, August 7^th, 2017, pages 36728-36730, inviting public comments on our plans to submit this request. The presubmission notice generated three comments, including one request for additional supporting materials. The Census Bureau responded to the request. Additionally, two comments were received regarding the exclusion of nonemployer businesses from the ABS collection instrument. Nonemployer businesses are not in scope for the ABS. Separately, the Census Bureau has determined that similar estimates on the race, gender, ethnicity, and veteran status for nonemployer businesses can be produced using administrative data. The Census Bureau has secured sufficient funding to move forward with producing nonemployer demographic statistics. The nonemployer administrative data will supplement the employer demographic data collected from ABS.. The presubmission notice comments can be found in attachment G.

A 30-day notice was published in the Federal Register, Vol. 82, No. 248, Thursday, December 28, 2017, pages 61534-61535, inviting public comments on this collection request. The notice generated five comments as summarized below.

(1) The Census Bureau should determine module content and consult with the American Economic Association for potential topics.

The Census Bureau plans to develop a 5-year content plan that can be shared publicly. The Census Bureau also plans to reach out to stakeholders and data researchers to help inform module content.

(2) The Census Bureau should revise specific questions based on suggestions from the commenter.

The Census Bureau continually evaluates content and makes improvements each survey year. All questions have been tested through cognitive interviews and the results of the testing have been implemented where feasible. The Census Bureau will evaluate which suggestions can be incorporated in future survey years.

(3) While the ABS may improve data quality and more timely data, the exclusion of nonemployer demographic data will leave a data gap making it difficult to assess business assistance needs for all businesses.

The Census Bureau met with stakeholders and discussed producing nonemployer demographic data from administrative records. Although nonemployer businesses will not be mailed as part of the ABS, the Census Bureau has received approval and sufficient funding to produce nonemployer demographic data using administrative data.

(4) By using administrative data to produce nonemployer demographic data, what will happen to some items that were collected in previous SBO’s for nonemployers.

The Census Bureau realizes that some detailed items will not be available if there is no administrative item to replace a survey question. The Census Bureau has discussed these changes with stakeholders and users and learned that the benefit of annual estimates for the number of women and minority-owned businesses is greater than the loss of detailed survey questions.

(5) With the replacement of the SBO by the ABS, the Census Bureau should ensure data collection efforts capture important data on issues concerning women owned businesses.

The Census Bureau will review the content request and work with groups such as the National Women’s Business Council to help inform relevant module content. The 30-day notice comments can be found in attachment H.

9. Paying Respondents

The Census Bureau will not pay or offer gifts to respondents of the ABS.

10. Assurance of Confidentiality

The information collected in this survey is confidential under Title 13, United States Code, Section 9. Title 13, United States Code, Sections 224 and 225 require businesses to report. Respondents are informed in the initial letter that responses are confidential and their response is mandatory. This information is also available from the electronic reporting instrument as shown in Attachment D.

11. Justification for Sensitive Questions

The ABS asks questions on the gender, ethnicity, and race of the owners. The business owner characteristics are important to understanding conditions of business success and failure, showing changes in business performance, and barriers to entrepreneurs. These data also allow for a comparison between minority-/nonminority-owned, women-/men-owned, and veteran-/nonveteran-owned businesses. ABS uses the race and ethnicity categories and definitions mandated by the OMB. These standards were developed by the Executive Branch and Congress.

By law (Title 13 of United States Code), all responses to the survey, including sensitive questions, are completely confidential and may be seen only by persons sworn to uphold the confidentiality of Census Bureau information. The data are used only for statistical purposes and the responses are summarized so that the confidentiality of individual respondents and their business activities is fully protected.

12. Estimate of Hour Burden

The ABS is designed to merge content from multiple collections into one collection. Therefore, the questionnaire is organized into form paths and respondents will see questions based on predetermined criteria. The form paths are determined based on the employment size of the company at the time of sampling. Businesses with 1-9 employees will received ABS-1 to collect R&D data. Businesses with 10 or more employees will receive ABS-2 which does not ask questions about R&D. The following form paths will be used for the ABS and are included in attachments B and C.

1. ABS-1 – for employer businesses with 1-9 employees

2. ABS-2 – for employer businesses with 10 or more employees

The 2017 ABS will be mailed in fiscal year 2018 to approximately 850,000 respondents. The sample size is needed to provide detailed comprehensive estimates for women-, minority-, and veteran-owned businesses to a detailed geography level (US, state, msa, county, and economic place). Starting with the 2018 ABS, that will be mailed in fiscal year 2019, the sample size is reduced to 300,000. The smaller sample size reduces respondent burden and will also provide quality estimates for women-, minority-, and veteran-owned businesses at a less detailed geography level (US, state, msa only). Response times will vary for selected respondents. For fiscal year 2018, the estimated weighted average for respondents to complete the survey is 52² minutes and the estimated total response burden is 735,934 hours. For fiscal years 2019 – 2022, the estimated weighted average for respondents to complete the survey is 52³ minutes and estimated total response burden is 262,240 hours.

The presubmission notice published in the Federal Register, Vol. 82, No. 150, August 7th, 2017, pages 36728-36730, estimated the response burden to be 35 minutes. However, the estimate was updated using paradata obtained from the collection instruments for previous SBO, ASE & BRDI-M collections, as well as results of cognitive interviews conducted for new ABS content.

According to the May 2016 Occupational Employment Statistics from the Bureau of Labor Statistics (BLS) website, the mean hourly wage for accountants (13-2011 Accountants & Auditors) was $36.89. The total annual cost to respondents for their time to respond for fiscal year 2018 is estimated to be $27,148,581. The total annual cost to respondents for their time to respond for fiscal years 2019-2022 is estimated to be $9,674,034.

2018 Fiscal Year Burden Estimate Derivation

Form Path	Burden Estimate (in minutes)	Est. Sampled Firms 4	Burden Hours
ABS-1	56	563,000	525,467
ABS-2	44	287,000	210,467
	Total	850,000	735,934

2019-2022 Fiscal Year Burden Estimate Derivation

Form Path	Burden Estimate (in minutes)	Est. Sampled Firms 5	Burden Hours
ABS-1	56	211,200	197,120
ABS-2	44	88,800	65,120
	Total	300,000	262,240

13. Estimate of Cost Burden

We do not expect respondents to incur any costs other than that of their time to respond. The information requested is of the type and scope normally known by respondents or carried in company records and no special hardware or accounting software or system is necessary to provide answers to this information collection. Therefore, respondents are not expected to incur any capital and start-up costs or system maintenance costs in responding. Further, purchasing of outside accounting or information collection services, if performed by the respondent, is part of usual and customary business practices and not specifically required for this information collection.

14. Cost to Federal Government

The ABS is funded jointly by the Census Bureau and NSF. The estimated cost to the Federal Government to conduct this survey for 5 reference years is $36.5 million. The Census Bureau has planned and allocated resources for the effective and efficient management of this information collection.

15. Reason for Change in Burden

The ABS is a new collection but does not create a new reporting burden for businesses. The ABS is a firm-level collection initiative purposely designed to replace the five-year SBO for employer businesses as well as ASE and BRDI-M. Otherwise, without the ABS, the Census Bureau would continue to conduct these three independent surveys: SBO, ASE and BRDI-M. Additionally, the ABS incorporates Innovation and Technology topics in order to accommodate a proposal to the Census Bureau to conduct a new survey that captures innovation activity. This implementation of ABS will reduce respondent burden, increase data quality, reduce operational cost, and operate more efficiently.

16. Project Milestones

    Milestone	2017 Reference Year Planned Completion Date	2018 Reference Year Planned Completion Date	2019 Reference Year Planned Completion Date	2020 Reference Year Planned Completion Date	2021 Reference Year Planned Completion Date
    Content Drafted for Cognitive Testing	June 2017	June 2018	June 2019	June 2020	June 2021
    Cognitive Testing Complete	August 2017	August 2018	August 2019	August 2020	August 2021
    Content Final/Centurion Requirements Final	November 2017	November 2018	November 2019	November 2020	November 2021
    Presubmission Notice Published in Federal Register	August 2017	August 2018	August 2019	August 2020	August 2021
    Approval Request Submitted to OMB	December 2017	December 2018	December 2019	December 2020	December 2021
    Usability Testing	May 2018	May 2019	May 2020	May 2021	May 2022
    Initial Mail	June 2018	June 2019	June 2020	June 2021	June 2022
    1st Follow-up	September 2018	September 2019	September 2020	September 2021	September 2022
    2nd Follow-up	November 2018	October 2019	October 2020	October 2021	October 2022
    Closeout	December 2018	November 2019	November 2020	November 2021	November 2022
    Micro Data Review Complete	March 2019	February 2020	February 2021	February 2022	February 2023
    Production Processing	August 2019	July 2020	July 2021	July 2022	July 2023
    Macro Data Review Complete	October 2019	September 2020	September 2021	September 2022	September 2023
    Dissemination Processing	November 2019	October 2020	October 2021	October 2022	October 2023
    Data Tables Published	December 2019	November 2020	November 2021	November 2022	November 2023

17. Request Not to Display Expiration Date

The assigned expiration date will be included on the collection instrument.

18. Exceptions to the Certification

There are no exceptions to the certification.

1 This clearance package will only cover 3 of the 5 year survey. The Census Bureau will prepare a new package for the remaining survey years at the appropriate time.

2 The estimated weighted average response time is rounded to 52 minutes. The true value is 51.94824.

3 The estimated weighted average response time is rounded to 52 minutes. The true value is 52.44800.

4 Estimates based on prior SBO sampling data to estimate the percent of sampled businesses that will have 1-9 employees for ABS-1 and how many sampled businesses will have 10 or more employees for ABS-2.

5 Estimates based on prior SBO sampling data to estimate the percent of sampled businesses that will have 1-9 employees for ABS-1 and how many sampled businesses will have 10 or more employees for ABS-2.

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