Over the past two months the U.S. Small Business Administration (“SBA”) has published two proposed rules to revise small business size standards in the North American Industry Classification System (“NAICS”). If the proposed rules are adopted, nearly 1,650 additional firms will become eligible for small business contracting programs and SBA small business loans.
NAICS is the standard used by the federal government in classifying businesses for the purpose of collecting, analyzing, and publishing statistical data related to the U.S. economy. The SBA uses NAICS as a basis for its small business size standards and is particularly relevant to businesses seeking to qualify for small business set aside contracts. In establishing size standards, the SBA takes into account the structural characteristics of individual industries, including average firm size, startup costs and entry barriers, and small business share of federal contracting dollars. The Small Business Jobs Act of 2010 requires the SBA to review these standards at regular intervals and make adjustments to reflect market conditions.
In summary, the SBA’s most recent proposal would:
- Increase increase small business size standards for 209 industries.
- Increase the refining capacity component of the Petroleum Refiners (NAICS 324110) size standard to 200,000 barrels per calendar day total capacity for businesses that are primarily engaged in petroleum refining.
- Eliminate the requirement that 90 percent of the output being delivered be refined by the bidder.
- Increase employee based small business size standards for 30 industries and three sub-industries (primarily in mining, transportation/delivery, publishing related, science R&D, and telecommunications industries).
- Decrease employee based small business size standards for three industries (Uranium-Radium-Vanadium Ore Mining; Silver Ore Mining; Anthracite Mining).
- Eliminate the Information Technology Value Added Resellers “exception” under NAICS 5411519 and its 150-employee size standard.
- Eliminate the Offshore Marine Air Transportation Services “exception” under NAICS 481211 and 481212 and their $30.5 million receipts based size standard.
If adopted, nearly 1,650 new firms will be eligible to compete for small business set-aside procurements. This increase is in addition to the 8,500 newly-eligible companies added by earlier size standard revisions that took effect July 2014. As the SBA’s small business programs offer unique and potentially lucrative business incentives, companies near the threshold for participation should keep a close eye on these proposed rules over the next several months. Comments on the proposed rules for Manufacturing and Non-Manufacturing are due November 10, 2014.