Effective Aug. 17, small businesses in 532 industries providing services to the federal government will see an increase in the dollar amount of annual revenues used to determine if the business is considered small or “other than small” by the Small Business Administration (SBA).
For example, the size standard for Electrical Contractors (238210) will increase from $15 million to $16.5 million. The size standard for Computer Systems Design Services (541512) will increase from $27.5 million to $30 million. And, the size standard for Commercial Building Construction (236220) will increase from $36.5 million to $39.5 million.
The SBA issued the interim final rule adjusting the receipts-based size standard due to inflation on July 18, with the comment period open to Sept. 16.
The entire rule and background information is available in the Federal Register here. This five-year inflationary-based adjustment was mandated in the 2010 Jobs Act, as was a separate review of the overall industry structure and federal market conditions, which has yet to be completed.
The SBA estimates that this current inflationary adjustment will affect over 89,000 firms currently considered “other than small” and allow them to claim “small” size status and participate in the related set-aside and sole source programs specific to their socio-economic status and size.
This adjustment only affects those industries measured by annual revenues, not those measured by number of employees (i.e., manufacturing.)
However, it is required that any business affected by this inflationary adjustment update their registration in the System for Award Management (SAM.gov) database and complete the representations and certifications section of SAM.gov to trigger the adjustment in their own record.
The SBA last completed an inflationary review in 2014 and is now required to perform the review every five years. While this review process does not guarantee a change in the size standards, the SBA states that this process “… provides assurances to the public that the SBA is monitoring inflation determine whether or not to adjust size standards within a reasonable period of time…”
Notwithstanding, the SBA has yet to complete the comprehensive review of size standards outside of inflation issues. This full review is also required every five years and has been due since 2017.
The SBA revised its methodology to update size standards in April 2019, when it published a related white paper explaining how the agency determines, reviews, or modifies its small business size standards.
When combined with the recent change from measuring the business revenues by the average of the last five years as opposed to the average of the last three years, the inflationary adjustment and the upcoming completion of the comprehensive review, more businesses will qualify as “small” and therefore be able to participate and benefit from the SBA’s government contracting small business programs.
Gloria Larkin is president and CEO of TargetGov and a national expert in business development in the government markets. Email [email protected].