Back in January, I commented on the lack of clarity associated with the the Small Business Runway Extension Act. The Runway Act calls for calculating a business’s size by averaging its annual receipts over the five most recently completed fiscal years. That, of course, is a change from the Small Business Administration’s (SBA) standard practice of calculating size under the same metrics, but for a three-year period.
Should a business use the three- or five-year standard to measure its size when submitting a proposal? It appears that a definitive answer is on the horizon.
This week, SBA proposed a rule that would incorporate the change to the five-year metric into the applicable regulations. Comments are due no later than August 23, 2019, which means that we should see some resolution on this issue in Fall 2019.
While we wait for a final rule, the the proposed rule itself provides some measure of clarity for contractors trying to reconcile the Runway Act against the existing SBA regulations. SBA provides a fixed line of demarcation between the three- and five-year standards. That is, until SBA adopts a final rule, it will continue to apply the three-year average for calculating average annual receipts.
Therefore, contractors submitting proposals at any time between now and the final rule can now feel confident in relying on the three-year standard to determine their size.
Check back for additional updates on this issue when SBA issues its final rule.