On September 29, 2022, the U.S. Small Business Administration (SBA) issued a final rule amending its small-business size regulations to incorporate the U.S. Office of Management and Budget’s (OMB) North American Industry Classification System (NAICS) revision for 2022 (NAICS 2022) into its table of small-business size standards.
What exactly did the SBA do with this new rule?
Because OMB’s NAICS 2022 revision created 111 new industries by reclassifying, combining, or splitting the156 industries, or partial industries, from NAICS 2017 industries or their parts, the SBA adjusted its size standards for these 111 new industries, which resulted in:
- An increase to the size standards for 51 industries or parts of industries.
- A decrease to size standards for 60 industries or parts of industries.
- A change in the size-standard measure from average annual receipts to number of employees for one industry.
- A change in the size-standard measure from number of employees to average annual receipts for a part of one industry.
- No change in size standards for 136 industries or parts of industries.
The SBA’s notice in the Federal Register contained two helpful tables. Table 4 shows the 2017 NAICS codes, or their parts, matched to the new 2022 NAICS codes. Table 6 shows the size standards for the industries added in to the 2022 NAICS code update.
The SBA has also issued a new size-standard table, incorporating the changes it has made in the new and revised 2022 NAICS codes.
Why is the SBA’s change in size standards important?
Whether a business is considered “small” or “not small” is an important qualification under for government contractors.
To be eligible for the SBA’s programs, including government procurements set aside for small-business concerns, a business must meet size requirements set by the SBA, in addition to other requirements. The SBA size standards define the maximum size that a business—and its affiliates—can be to qualify as a small business for a particular contract. The size standards are expressed either in average number of employees or average annual receipts in millions of dollars, unless otherwise specified. The number of employees or annual receipts indicates the maximum allowed for a small business concern and its affiliates to be considered small.
Ensuring that their business meets the applicable SBA size standard is important for entities competing for small-business procurements or participating in the SBA’s 8(a) program, its HUBZone program, and/or its woman-owned and veteran-owned small-business programs. Accordingly, entities participating in the SBA’s small-business programs should carefully review the new size standards to determine if the size standard for their applicable NAICS code has changed and, if it has changed, if they remain “small.”
Finally, the SBA has advised that:
Businesses registered in the System for Award Management (SAM.gov) must update their SAM registration in order to have their small business status updated based on the new size standards effective October 1, 2022. Until the SAM registration is updated, the SAM profiles will continue to display the small business status under the old size standards.
If an entity’s NAICS code has changed due to the 2022 update, or the applicable size standard has changed, it may need to update its SAM.gov registration.
This article summarizes aspects of the law and does not constitute legal advice. For legal advice for your situation, you should contact an attorney.
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