Story excerpt provided by SmallGovCon

The SBA’s regulations state it will examine monetary-based size standards (e.g., receipts, net income, assets) at least once every five years and determine if adjustments are needed to those standards at such time. 13 C.F.R. § 121.102. But what about employee-based size standards? In fact, the same rule applies for reviewing and adjusting those standards as a result of the Small Business Jobs Act of 2010. On April 26, 2022, the SBA published its proposed rule to change the size standards for a number of employee-based size standards for manufacturing and other industries. Let’s look at these changes.

For the proposed rule, SBA reviewed the sectors of Mining, Quarrying, and Oil and Gas Extraction (Sector 21); Utilities (Sector 22); Manufacturing (Sector 31-33); Transportation and Warehousing (Sector 48-49); Information (Section 51); Finance and Insurance (Sector 52); Professional, Scientific and Technical Services (Sector 54); and Administrative and Support, and Waste Management and Remediation Services (Sector 56). While SBA adjusts monetary-based size standards on the basis of inflation, it obviously cannot use inflation to determine a proper employee-based size standard. As such, the SBA examines five primary factors. Four of these factors concern industry structure: average firm size, degree of competition within an industry, start-up costs and entry barriers, and distribution of firms by size. The fifth looks at small business competitiveness with federal contracts. “SBA…examines, for each industry averaging $20 million or more in average annual Federal contract dollars, the small business share in Federal contract dollars relative to the small business share in total industry’s receipts.” SBA will consider other secondary factors such as impact of size standard changes on small businesses.

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Originally published May 5, 2022.