Photo by Artem Beliaikin on Unsplash

Small businesses have significant advantages when it comes to government contracting. These advantages include: access to limited competition procurement through small business set-aside contracts; availability of SBA-guaranteed loans and surety bonds; and other like advantages. Being small also qualifies the business owner to participate in various government programs, such as the 8(a), Woman-Owned Small Business, HUBZone, and Service Disabled Small Business programs, which provide further set-aside opportunities.

Whether a business is “small” or not is based on the North American Industry Classification System or NAICS Code. Each NAICS code is based on either the business’ number of employees or the average annual revenue for the business over the past three years. The U.S. Small Business Administration (“SBA”) is required to review and update these revenue-based NAICS size standards at least once every five years to adjust for inflation.

On July 18, 2019, the SBA issued a Proposed Interim Final Rulemaking where it made significant increases to account for inflation in all monetarily-based size standards for a wide range of industries.

These proposed inflationary increases are substantial for both the prime / general contractors, subcontractors and suppliers. These new size standards become temporarily effective on August 19, 2019 (with comments requested on or before September 16, 2019), subject to further adjustment and revisions based on comments received, if any.  

Both the increase in size standards and expansion of the review frequency from three to five years should go a long way to increasing the number of small businesses, and increasing competition in government contracting projects. The changes should result in benefits to all interested parties, including the government and private industry.