SBA Proposes to Increase Size Standards for 46 Service Industries

On November 13, 2020, the SBA announced the results of its review for 94 industries. These 94 industries are contained in NAICS codes Sectors 54 - Professional, Scientific and Technical Services; 55 - Management of Companies and Enterprises; and 56 - Administrative and Support and Waste Management and Remediation Services. Using Census Bureau information, SBA ascertained that more than one million small businesses work in these three sectors. During FYs 2016-2018, approximately 33,000 unique small businesses received a federal contract in these sectors. For the 94 NAICS codes in these three sectors, SBA’s proposed rule would increase the receipts-based small business size standards for 46 NAICS codes and leave the remaining 48 size standards at the current level.

To evaluate current industry and market conditions, SBA has developed a Size Standards Methodology to statistically assess industry differences and the overall degree of competitiveness of an industry. SBA typically considers four primary factors, including: (1) average firm size; (2) degree of competition within an industry; (3) startup costs and entry barriers; and (4) distribution of firms by size. SBA also considers other factors, including current economic conditions, its mission and program objectives, the Administration’s current policies, and impacts on small businesses under the current size and proposed size standards. SBA did not propose any reductions to size standards because of the current economic conditions caused by the COVID-19 pandemic. SBA also decided not to propose an increase to its maximum size standard of $41.5 million.

Using its Size Standards Methodology, SBA has proposed substantial size standard increases for many of the 46 industries. Indeed, SBA proposed size standard increases of 50 percent or more for 16 of the 46 industries. SBA also proposed 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. The SBA proposed to increase the size standard for these 46 industries as follows (click here for complete table):

These size standard adjustments will have significant impacts on the small businesses in these 46 industries. Many larger small 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 businesses for longer periods under the increased size standards. With these proposed changes in mind, many small businesses may need to revise their strategic planning.

Comments on the proposed rule must be submitted to the SBA by January 12, 2021.