For the first time since 2014, the Small Business Administration (SBA) adjusted size standards for small businesses to keep pace with inflation. Initially posted by the SBA for public comment back in June, the interim rule went into effect on August 19, 2019.
According to SBA, the change “restores small business eligibility in real terms to businesses that have grown above the existing size standard due to inflation-led revenue growth rather than due to increased business activity.”
For those readers in the construction industry, the revision increases the applicable size standard to $39.5 million (from $36.5 million) for institutional, commercial, and institutional building contractors. For most specialty trade contractors, the increase raises the size standard to $16.5 million (from $15.0 million).
Access to the full list of standards for all industries is available at this link.
So what happens now?
The SBA projects that the upward adjustment will make an additional 89,730 firms eligible for small business status. In theory, that could lead to an increase in the number of size protests as formerly large businesses now seek set-aside work. The SBA’s pending Runway Extension Act (which changes the applicable size review period from three years to five years) will only add to the lack of clarity.
Newly eligible small businesses should focus on compliance first. For example, updating the business’ System for Award Management (SAM) profile and completing the representations and certifications (which opens the door for set-aside procurement opportunities). Contractors should also update their status in the SBA’s Dynamic Small Business Search engine.
Recall that submitting a proposal for a set-aside procurement when the contractor knows – or should know – that it does not qualify due to its size (including all affiliates) may cause the business to be liable for civil or criminal penalties, including liability under the Civil False Claims Act. That is on top of the obvious disadvantage of losing eligibility for set-aside work.
Familiarity with size protests and maintaining compliance with SBA standards has to be of the utmost importance for small businesses.