On July 18, 2019, the Small Business Administration (“SBA”) issued an interim final rule with request for comments raising the revenue-based small business size standards to account for inflation. SBA has established size standards for numerous classes of business for the purpose of determining whether a company is small. These size standards differ based on the type of work performed by the company and are matched to the North American Industry Classification System (“NAICS”) Codes. The size standards are based either on the company’s number of employees or average annual receipts. The company must have fewer employees or less annual receipts than the stated size standard in order to qualify as a small business.
The Small Business Jobs Act of 2010 requires SBA to review its size standards and make adjustments to reflect market conditions at least every five years. In reviewing the size standards, SBA considers changes in industry structure and federal market conditions for small businesses as well as inflation. This latest adjustment is for inflation that has occurred since the last inflation adjustment in 2014. By adjusting the size standard, SBA is seeking to reinstate small business eligibility for contractors who no longer qualify as small businesses due to inflation-led revenue growth and increase the small business contractor pool. SBA estimates that the inflation adjustment will enable almost 90,000 companies to quality as small businesses.
The inflation adjustment to the revenue-based size standards will impact 518 industries including construction of buildings; heavy and civil engineering construction; specialty trade contractors; warehousing and storage; truck transportation; transit and ground passenger transportation; real estate; rental and leasing services; professional, scientific, and technical services; administrative and support services; waste management and remediation services; crop production; animal production; and various retail concerns. For the construction-based size standards except dredging and surface cleanup activities, the size standard will increase from $36.5 million to $39.5 million. The dredging and surface cleanup activities size standard will increase from $27.5 million to $30 million. For the specialty trade contractors, the size standard will increase from $15 million to $16.5 million.
The interim final rule takes effect on August 19, 2019. Those who wish to comment on the interim rule must submit their comments by September 16, 2019.