SBA New Business Size Standards Take Effect in February

By Terry Stroud, SBTDC/PTAC Counselor at Fayetteville State University

As a result of the SBA’s size standards review required by 2010 Small Business Jobs Act, the federal definition of what qualifies as a small business will change effective February 26, 2016. Two final rules, detailing the changes, were published on January 26, 2016 in the Federal Register. Information regarding the current changes is available at the following link to the SBA’s website and links to the two final rules themselves, listed on the SBA’s page at the Federal Register website. The changes taking effect are likely to produce significant opportunities for both existing and newly classified small businesses such as yours.

Changes listed at the SBA Website:

For NAICS Sector 31-33, Manufacturing

The United States Small Business Administration (SBA) has issued a final rule to do the following:

  • Increase small business size standards for 209 industries in NAICS Sector 31-33, Manufacturing.
  • Modify the size standard for NAICS 324110, Petroleum Refiners, by
    • increasing the refining capacity component of the size standard to 200,000 barrels per calendar day for businesses that are primarily engaged in petroleum refining; and by
    • eliminating the requirement that 90 percent of the output to be delivered be refined by the successful bidder from either crude oil or bona fide feedstocks.
  • Update footnote 5 to NAICS 326211 to reflect current Census Product Classification Codes 3262111 and 3262113.

For industries in NAICS Sector 42, Wholesale Trade, and NAICS Sector 44 45, Retail Trade

The United States Small Business Administration (SBA) has issued a final rule that

  • Increases employee based size standards for 46 industries in North American Industry Classification System (NAICS) Sector 42, Wholesale Trade;
  • Increases the employee based size standard for one industry in NAICS Sector 44 45, Retail Trade;
  • Retains the current size standards in the remaining industries in those sectors;
  • Retains the current 500 employee size standard for Federal procurement of supplies under the nonmanufacturer rule (13 CFR 121.406).

SBA updates employee based small business size standards for Industries that are not part of Manufacturing (NAICS Sector 31 33), Wholesale Trade (NAICS Sector 42), or Retail Trade (NAICS Sector 44 45)

The United States Small Business Administration (SBA) has issued a final rule to modify employee based small business size standards for 36 industries and “exceptions” in SBA’s table of size standards that are not part of North American Industry Classification System (NAICS) Sector 31-33 (Manufacturing), Sector 42 (Wholesale Trade), or Sector 44-45 (Retail Trade). Specifically, the rule

  • Increases 30 size standards for industries and three “exceptions.”
  • Decreases size standards from 500 employees to 250 employees for three industries, namely
    • NAICS 212113 (Anthracite Mining),
    • NAICS 212222 (Silver Ore Mining), and
    • NAICS 212291 (Uranium-Radium-Vanadium Ore Mining).
  • Maintains the Information Technology Value Added Resellers (ITVAR) “exception” under NAICS 541519 (Other Computer Related Services) as follows:
    • It retains the 150 employee size standard, and it amends footnote 18 to SBA’s table of size standards by adding the requirement that the supply component of small business set-aside ITVAR contracts (i.e., computer hardware and software) must comply with the nonmanufacturing performance requirements or nonmanufacturer rule.
  • Eliminates the Offshore Marine Air Transportation Services “exception” under NAICS 481211 (Nonscheduled Chartered Passenger Air Transportation), and NAICS 481212 (Nonscheduled Chartered Freight Air Transportation).
  • Eliminates the Offshore Marine Services “exception” for industries in NAICS Subsector 483 (Water Transportation), and their $30.5 million receipts based size standards.
  • Removes footnote 15 (the “exception” to Subsector 483) from the table of size standards.

SBA issues a final rule on increases to monetary size standards for inflation

The U.S. Small Business Administration (SBA) has finalized, without change, its June 12, 2014 interim final rule that adjusted monetary small business size standards for inflation. Specifically, the rule

  • Increased by 8.73 percent all monetary based industry size standards (i.e., receipts, assets, net worth, and net income) for inflation that has occurred since the last adjustment in 2008. These adjustments were in addition to revisions that were part of the comprehensive size standards review, as mandated by the Small Business Jobs Act of 2010 (Jobs Act).
  • Increased by the same amount the program based size standards, with the exception of the new alternative size standard for SBA’s 7(a) and 504 loan programs that was established under the Jobs Act. The new alternative size standard will remain in effect until SBA establishes a permanent alternative size standard for those programs.
  • Deleted references to Surety Bond Guarantee size standards for contracts awarded in the Presidentially declared disaster areas following Hurricanes Katrina, Rita, and Wilma in 2005.
  • Deleted the determination date for eligibility under the Agency’s Economic Injury Disaster Loan (EIDL) Program in connection with Hurricanes Katrina, Rita, and Wilma.
  • Clarified that Footnote 9 to its table of size standards is not limited to NAICS 531190, Lessors of Other Real Estate Property, but rather applies to all industries in Industry Group 5311, Lessors of Real Estate.

What outcomes are expected from the changes made?

According to SBA estimates, more than 8,400 additional businesses will gain small business status under the adjusted size standards and become eligible for SBA’s financial and federal government procurement programs. Additionally, the SBA stated that these changes can possibly lead to $150 million to $200 million in additional federal contracts and 80 additional loans, totaling about $30 million, to small businesses.

Suggested Course of Action

Whether you are already classified as small, or you are potentially among the 8400 additional businesses expected to qualify as small, $150 million to $200 million in additional federal contracts each year is opportunity to be welcomed. SBTDC/PTAC is available to assist you. If you feel that the changes now qualify your business as small, we can assist you with reviewing your qualifications and taking the first step in registering your entity in SAM, should you meet the new standards. If your business is already classified as small, we can assist you in positioning your company to take advantage of the additional contracts expected. The SBTDC/ PTAC will continue to keep clients updated as further changes are made.

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