SBA Publishes New Small Biz Size Standards

February 9, 2012

On Feb. 10, 2012, the U.S. Small Business Administration (SBA) published a final rule to change their official size standards. The new rule will increase the revenue-based size standards for more than 37 receipts-based size standards in 34 industries and 3 sub-industries in the North American Industry Classification System (NAICS).

Due to changes in the economy, industry structure, and the federal contracting marketplace, SBA, over time, receives comments requesting that it analyze and evaluate its small business size standards. In 2007, the SBA began its first comprehensive review of small-business size standards since the late 70s and early 80s. On Sept. 27, 2010, the President signed into law the Small Business Jobs Act of 2010 (the Act). Under that Act, the SBA Administrator has the authority to “specify detailed definitions or standards by which a business concern may be determined to be a small business concern for the purposes of this Act or any other Act.”

On March 16, 2011, SBA published a proposed rule for public comment which proposed increasing the size standards in 35 industries and 1 sub-industry in NAICS for “Professional, Scientific and Technical Services,” and one industry for “Other Services.” Various factors were considered including growth trends, average firm size, competition within the industry, start-up costs and entry barriers, as well as a number of other secondary economic characteristics. SBA’s small business size standards use two measures: annual receipts and the number of employees to determine whether a business is “small” for purposes of Federal government programs.

On Feb. 8, 2012, Rep. Joe Walsh (R – Ill.) and Rep. Gerry Connolly (D – Va.) introduced the Small Business Protection Act of 2012 (H.R. 3987), which seeks to ensure that the new size standards assigned to industry groups are appropriate for each NAICS code associated therewith.

SBA’s final rule increases 37 receipts-based size standards in 34 industries and 3 sub-industries in NAICS for “Professional, Scientific and Technical Services,” Sector 54. The SBA also increased one receipts-based size standard in NAICS Sector 81, Other Services. Several of the industries affected include: legal services (from $7 million to $10 million), engineering services (from $4.5 million to $19 million), and accounting, tax preparation, bookkeeping, and payroll services (from $7.0 or $8.5 million to $19 million).

SBA received 1,426 comments on the proposed rule from a variety of different entities, including small firms, trade groups, and professional associations. According to SBA’s final rule, 30 percent of respondents supported the increased standards, 53 percent opposed them, and 12 percent supported the new standards but suggested a smaller increase.

SBA’s final rule will go into effect on March 12, 2012. All NSBA members are encouraged to review their industry’s size standard and provide us with any comments, suggestions, or concerns.


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