The United States Federal Government has always promoted doing business with Small Businesses. In fact, Congress has previously mandated that small businesses receive 23% of federal government prime contracting dollars, including 5% of prime and subcontracts to Small Disadvantage Businesses; 5% of prime and subcontracts to Women-Owned Small Businesses; 3% of prime and subcontracts to HUBZone Small Businesses; and 3% of prime and subcontracts to Service-Disabled Veteran-Owned Small Businesses. As stated by the Small Business Administration (SBA) in the past, Federal contracting with small businesses is a win-win. Small businesses get the revenue they need to grow their businesses and create jobs, and the federal government gets the opportunity to work with some of America’s most innovative and nimble small businesses, often times with a direct line to the CEO.
Over the last several years, the Government has made it easier for companies to maintain their designation as a small business to extend the time they need to grow and develop. Back in 2019, the Government issued a final rule, based on the Small Business Runway Extension Act (SBREA), which extended all of SBA’s receipts-based size standards, and other agencies’ proposed receipts-based size standards, to a 5-year averaging period (rather than the previous 3-year averaging period). This gave small business additional runway to maintain their small status a little longer to give them the time they need to establish themselves in the marketplace.
Similarly, in 2022, the SBA issued four final rules increasing the small business size standards across several industries. These rules are expected to expand SBA programs to over 50,000 new firms, and create contracting opportunities estimated at $1 billion for 844 newly qualified small businesses. For example, these new standards size standards increased 46 industries, including 27 industries in the highly used Sector 54 (Professional, Scientific and Technical Services). Here are just a few of the increases to some of the most popular NAICS Code:
These changes increase access for new companies and will allow existing businesses to participate in longer small-business procurement programs. Many of the small businesses we work with were getting close to or had recently outgrown their old applicable size standard and now will qualify as small businesses for a few more years under the new size standards.
For help interpreting these changes, reach out to the consulting professionals at Saggar & Rosenberg.