By Jason Miller, Federal News Network
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SBA is proposing to reduce the number of and simplify the approach to the NAICS codes and reduce the total size standard categories from nearly 1,000 to 338.
The Small Business Administration is trying to open the federal contracting door to more small businesses. In a new proposed rule issued today, SBA is updating the small business size standards that would make more than 114,000 companies eligible for federal small business contracts.
Under this new regulation, small business employee-based and revenue-based thresholds would significantly increase as part of how the agency says it’s trying to address long-standing complaints about how the government determines size standards.
Additionally, SBA is proposing to reduce the number of and simplify the approach to the North American Industry Classification System (NAICS) codes as a way to define small business markets. The agency wants to revamp the existing NAICS structure of five or six digits to a four-digit classification system that reduces total size standard categories from nearly 1,000 down to 338 broad industry groupings. Of the 338 new groupings, the SBA says 45 would retain their current size standards, while 86 would change from revenue based to employed based and the remaining size standards would continue to be revenue based.
“This proposal ensures that these job creators have the regulatory certainty to scale, expanding small business eligibility by 0.3%, or over 110,000 firms. By streamlining definitions, the SBA will expand access capital, counseling and contracting opportunities, which in turn create jobs and drive growth,” said SBA Administrator Kelly Loeffler in a statement.
Along with the new size standards, SBA is proposing major changes to the methodology to determine these thresholds.
SBA wants comments on the new size standards, and particularly six specific questions about the proposed methodology changes, by Sept. 21.
The agency last updated size standards, mainly for inflation purposes, in 2022 and it last changed the methodology in 2024.
Missing a critical step?
Experts say this may be the first time SBA released an updated size standard methodology at the same time it released the new size standards and that is worrisome.
During the administration of President Joe Biden, John Shoraka, chairman of GovConPros and a former SBA associate administrator of Government Contracting and Business Development, said the agency released the draft methodology, received comments and made changes. Only then, he said, did SBA issue new draft size standards. He said the government never finalized the update to the revenue-based size standards and the revamped employee-based size standards never got out of SBA even as a proposed rule.