Alert
Alert
04.04.22
As we discussed in a prior Client Alert, under the Small Business Jobs Act of 2010, the U.S. Small Business Administration (SBA) is required every five years to review the existing size standards and make necessary adjustments to reflect current industry and market conditions. This review is separate from the adjustment for inflation that the SBA is required to make to all receipts-based size standards, also every five years. Rather than review all of the more than 1,000 North American Industrial Classification System (NAICS) code standards at one time, the SBA spreads its effort over the five-year period, evaluating several industry sectors at a time.
On March 31, 2022, the SBA issued four final rules that cover 468 industries. Among the rule changes, the SBA increased the size standards for 229 industries. It did not, however, increase the maximum revenue-based size standard of $41.5 million. Because of continuing concerns about the COVID-19 pandemic’s impact on economic conditions, the SBA did not reduce any size standards.
The first final rule increased the size standards for 68 industries, including 58 industries and two subindustries in NAICS Code Sector 11 (Agriculture, Forestry, Fishing and Hunting), three industries in Sector 21 (Mining, Quarrying, and Oil and Gas Extraction), three industries in Sector 22 (Utilities), and one industry and one subindustry in Sector 23 (Construction). This final rule includes size standard increases of 50 percent or more for 54 of the 68 industries and increases of at least 20 percent for an additional eight industries. For these 68 industries, the average size standard increase was more than $3 million.
The second final rule increased the size standards for 45 industries, including 18 industries in NAICS Code Sector 48 – 49 (Transportation and Warehousing), eight industries in Sector 51 (Information), 10 industries in Sector 52 (Finance and Insurance), and nine industries in Sector 53 (Real Estate and Rental and Leasing). This final rule includes size standard increases of 50 percent or more for 19 of the 45 industries and increases of at least 20 percent for an additional 10 industries. For these 45 industries, the average size standard increase was more than $6.5 million.
The third final rule increased the size standards for 70 industries, including 14 industries in NAICS Code Sector 61 (Education Services), 18 industries in Sector 62 (Health Care and Social Assistance), 11 industries in Sector 71 (Arts, Entertainment and Recreation), four industries in Sector 72 (Accommodation and Food Services), and 23 industries in Sector 81 (Other Services). This final rule includes size standard increases of 50 percent or more for 15 of the 70 industries and increases of at least 20 percent for an additional 23 industries. For these 70 industries, the average size standard increase was more than $3.5 million.
The fourth final rule increased the size standards for 46 industries, including 27 industries in NAICS Code Sector 54 (Professional, Scientific and Technical Services), two industries in Sector 55 (Management of Companies and Enterprises), and 17 industries in Sector 56 (Administrative and Support and Waste Management and Remediation Services). This final rule includes substantial size standard increases for many of the 46 industries. Indeed, the final rule includes size standard increases of 50 percent or more for 16 of the 46 industries and increases of at least 20 percent for an additional 17 industries. For these 46 industries, the average size standard increase was more than $5.5 million.
These size standard adjustments will significantly impact the small businesses in these 229 industries. Many businesses that have recently outgrown their applicable size standard may qualify again as small businesses under the increased size standards. Also, many small businesses may be able to continue to qualify as small for longer periods under the increased size standards. Given these significant rule changes, many small businesses may need to revise their strategic planning.