Executive Summary

• SBA is proposing a top-to-bottom rewrite of its size standards. A proposed rule to be released on August 20, 2026 (RIN 3245-AI67) seeks to replace nearly 1,000 industry-specific size standards with 338 standards set at the 4- and 5-digit NAICS level, eliminate all subindustry exceptions (including ITVAR), convert construction and other sectors to employee-based standards, and remove the ceiling on size standards. Comments are due September 21, 2026.
• Thresholds in core ANC, Tribal, and NHO industries increase dramatically, including by 10X in Some Cases. Engineering rises from $25.5 million to $252 million, IT services from $34 million to $531 million, management consulting from roughly $24.5 million to $295 million, and commercial construction converts from a $45 million receipts cap to 600 employees — giving 8(a) subsidiaries unprecedented runway to grow without losing small business status.
• New competition comes with the new runway. Roughly 114,500 firms would become small, including about 37,000 experienced contractors currently holding $71 billion in federal contracts. Agencies will receive automatic small business goaling credit for those incumbents, which may soften the goaling pressure that has historically driven work to the 8(a) program.
• Entity-owned firms are uniquely positioned to use the new headroom. SBA’s new self-certification framework for social disadvantage (effective September 10, 2026) is likely to expand the number of individually-owned 8(a) applicants — but individual economic disadvantage caps confine those entrants to far smaller firms. Unless SBA raises the economic disadvantage limits, only entity-owned participants (ANCs, Tribes, NHOs, and CDCs) can occupy the full scale the new size standards allow.
• A certification window is open now. SBA has begun approving entity-owned 8(a) applications — the first approvals since the application freeze began in August 2025 — while pending individually-owned applications must be re-worked under the new social disadvantage test. Entities with subsidiary applications pending or in preparation should move promptly.

On August 20, 2026, the U.S. Small Business Administration published a proposed rule (RIN 3245-AI67; Docket No. SBA-2026-0199) that would rewrite the small business size standards for the entire economy as part of its third five-year review under the Small Business Jobs Act. The proposal replaces nearly 1,000 industry-specific size standards with 338 standards set at the 4- and 5-digit NAICS level, converts most of the construction and several other sectors from receipts-based to employee-based standards, eliminates all 18 subindustry “exceptions” (including the ITVAR exception), removes the longstanding ceiling on size standards, and dramatically increases the thresholds in nearly every industry in which Alaska Native Corporations, Tribes, and Native Hawaiian Organizations and their subsidiaries operate. SBA estimates the rule would make 114,541 additional firms small — including roughly 37,000 firms currently holding about $71 billion in federal contracts. Comments are due 30 days after publication — September 19, 2026 (which, falling on a Saturday, should roll to Monday, September 21, 2026).

What SBA Is Proposing

The proposed rule implements a new “Revised Methodology” that departs from SBA’s 2024 approach in five significant ways:

• Consolidation to 4- and 5-digit NAICS. The current 978 six-digit standards (plus 18 exceptions) collapse into 338 standards — 276 at the 4-digit industry-group level and 62 at the 5-digit level. A single standard now governs entire industry groups, such as all IT services under NAICS 5415.
• Elimination of all exceptions. The subindustry exceptions disappear, including the Information Technology Value Added Reseller (ITVAR) exception under NAICS 541519 and the Environmental Remediation exception under NAICS 562910. ITVAR procurements would instead be governed by the base 5415 standard — proposed at $531 million in receipts — removing the 150-employee ceiling that has constrained reseller subsidiaries.
• Default to employee-based standards. Wherever SBA has statutory discretion, standards convert from receipts to headcount to reduce firms cycling in and out of small status due to inflation, revenue volatility, and productivity growth. Receipts-based standards fall from 496 to 129. Most notably, the entire construction sector converts to employee-based standards.
• A new analytical framework with no ceiling. SBA replaces its prior seven-factor analysis with a single “average market size” measure (national industry size, number of geographic markets, and a net-imports adjustment), expressly modeled on the market-definition concepts in the DOJ/FTC Merger Guidelines. Critically, the new formula has no maximum size standard — which is how thresholds like $531 million (IT services) and $503 million (hotels) become possible where a $47 million cap previously applied.
• Inflation plus productivity adjustments. For the first time, receipts-based standards will be adjusted for productivity growth in addition to inflation, meaning monetary thresholds will ratchet upward faster over time.

SBA also proposes a blanket policy of not reducing any size standard, even in the 45 industries where its own analytics suggested a decrease. The practical result: the rule is almost entirely one-directional. SBA projects that only a handful of firms in a single insurance industry would lose small business status.

New Size Standards in Industries Where ANCs, Tribes, and NHOs Operate

The increases in the NAICS codes most commonly used by ANC, Tribal, and NHO subsidiaries are substantial — in many cases ten times the current threshold or more:

The construction conversion deserves particular attention. A construction subsidiary is measured today against a $45 million receipts cap; under the proposal, it would be measured against a 600–900 employee cap with no revenue limit. For subsidiaries running lean self-performance models with significant subcontracted scope, this effectively removes the size ceiling that has driven graduation planning. The same dynamic applies to oilfield and mining services under NAICS 213112, which moves from a $47 million receipts standard to 2,650 employees.

What This Means for ANCs, Tribes, and NHOs: Opportunities

• Dramatically longer small business runway. 8(a) subsidiaries in engineering, IT, consulting, facilities support, and environmental services that have been managing growth against $19–$47 million ceilings would have hundreds of millions of dollars of headroom — enough to complete a full nine-year 8(a) term, and continue competing for small business set-asides afterward, without sizing out of a primary NAICS code.
• Expanded sole-source capacity. ANC and Tribal above-threshold 8(a) sole-source authority (and NHO authority for Department of War procurements) is statutory and unchanged, but eligibility for any 8(a) award requires that the subsidiary be small under the assigned NAICS code at the time of offer. Higher standards mean larger, more mature subsidiaries remain eligible for direct awards.
• Relief for ITVAR and reseller subsidiaries. Eliminating the 150-employee ITVAR exception in favor of a $531 million receipts standard is a significant expansion for value-added resellers with high pass-through revenue.
• Reduced size-protest exposure. Wider margins between actual size and the applicable standard reduce protest risk and simplify recertification following acquisitions and other transactions — a meaningful benefit for entity-owned families active in M&A.

What This Means for ANCs, Tribes, and NHOs: Competitive Risks

• 37,000 experienced competitors re-enter the small business base. The firms regaining small status are not startups; they are seasoned mid-tier primes, concentrated in exactly the codes where entity-owned firms compete — SBA identifies more than 5,300 newly small firms with existing contracts in Engineering Services alone, and thousands more across IT services and management consulting. Entity-owned subsidiaries competing for total small business set-asides will face a much deeper and more capable field.
• Goaling dilution. Agencies will automatically receive small business goaling credit for existing contracts held by newly small incumbents — roughly $71 billion — without restructuring a single procurement. That may soften the goaling pressure that has historically driven contracting officers toward 8(a) set-asides and entity-owned sole-source awards. Entity-owned participants should be prepared to make the affirmative case for the 8(a) program’s value beyond goaling credit.
• A larger — but smaller-scale — individually-owned 8(a) applicant pool. SBA’s final rule on social disadvantage (published August 11, 2026; effective September 10, 2026) replaces both the rebuttable presumption and the individualized narrative with a streamlined test: an applicant identifies evidence that a governmental or private entity discriminated against or favored a racial, ethnic, or cultural group, then self-certifies group membership and material harm. Because SBA has indicated that the former rebuttable presumption itself — along with DEI and affirmative action policies — can supply the qualifying evidence, the social disadvantage element is now readily satisfied by virtually any applicant, and individually-owned application volume is likely to surge once processing resumes. Economic disadvantage becomes the operative gate: the caps on adjusted net worth ($850,000), average adjusted gross income ($400,000), and total assets ($6.5 million, including the value of the business) confine individually-owned entrants — and participants — to firms far below the new size ceilings. The practical result is more competition from a larger number of smaller 8(a) firms on competitive 8(a) procurements, while entity-owned participants remain the only pathway able to occupy the full headroom the proposed size standards create. One important caveat: SBA may seek to increase the economic disadvantage thresholds to broaden individual access to the program, which would erode this structural distinction — entity-owned participants should monitor for such a rulemaking and be prepared to comment.
• Entity-owned approvals have resumed — a first-mover window. SBA has begun approving entity-owned 8(a) applications, reportedly approving roughly 35 in recent days — the first approvals since processing halted in August 2025. Because entity-owned eligibility was expressly walled off from the social disadvantage rulemaking, SBA can process the entity-owned queue immediately, while pending individually-owned applications are expected to be returned for new showings under the test taking effect September 10. ANCs, Tribes, and NHOs with subsidiary applications pending or in preparation have a near-term window to certify and position new participants before individually-owned processing resumes at scale.
• No change — for now — to the same-primary-NAICS restriction on sister subsidiaries. The prohibition on two 8(a) participants owned by the same entity operating under the same primary NAICS code keys to the 6-digit code a subsidiary designates. The proposed rule changes only which size standard attaches to a code — it does not alter NAICS code assignment on contracts or primary NAICS designations — so entity-owned families structured across adjacent 6-digit codes (for example, sister subsidiaries in 541511 and 541512) are unaffected as drafted. However, once SBA’s size regulations no longer recognize distinctions below the 4- and 5-digit level, future conforming amendments to the 8(a) regulations — or adjudications reading “same primary NAICS code” at the level SBA now regulates — could push the restriction to the industry-group level. That would significantly constrain how ANCs, Tribes, and NHOs structure multiple subsidiaries within broad groups such as IT services (5415), consulting (5416), or nonresidential construction (2362). Comment letters should ask SBA to confirm on the record that the consolidation is for size-standard purposes only and does not affect the operation of the sister-subsidiary restriction at the 6-digit level.
• Not every conversion helps every subsidiary. Where a standard converts from receipts to employees, labor-intensive subsidiaries — environmental field services, facilities operations and maintenance, seasonal workforces — should model headcount carefully. The direction of benefit is not uniform.

Recommended Next Steps

• Map your subsidiaries’ primary and secondary NAICS codes against the proposed standards and identify where the changes create growth capacity, sole-source eligibility, or new competitive exposure.
• Advance pending or planned subsidiary 8(a) applications now, while SBA is actively processing the entity-owned queue and before individually-owned application volume returns.
• Revisit graduation, restructuring, and acquisition plans premised on current size ceilings — particularly in construction, IT, engineering, and oilfield services.
• Consider submitting comments, individually or through coalition channels. The 30-day comment window is unusually short for a rule of this scope, and SBA is separately taking comment on the underlying Revised Methodology white paper. Transition rules — which standard applies to pending offers, pending 8(a) applications, and existing contract recertifications — are an area where comments could meaningfully shape the final rule, as is a request that SBA expressly confirm the NAICS consolidation does not alter primary NAICS designations or the restriction on same-entity subsidiaries sharing a primary NAICS code.
• Watch the interaction with the 8(a) application pipeline. An expansion of small business eligibility premised on increasing competition sits uneasily alongside a prolonged certification freeze, and that tension is useful ground for continued engagement with SBA and the congressional delegation.

Comments are due by September 21, 2026, via www.regulations.gov (RIN 3245-AI67 / Docket No. SBA-2026-0199).

This article summarizes aspects of the law and does not constitute legal advice. For legal advice with regard to your situation, you should contact an attorney.