This month it becomes easier to qualify for and remain in the Small Business Administration’s (SBA) programs as a direct result of high inflation over the last year. Notably, the SBA increased the maximum income, net worth, and asset qualification requirements and also raised business size standards across the board. This should make more business owners eligible to qualify for the valuable small business set-aside work for the federal government.
Inflation has been a source of great frustration for federal contractors since the pandemic began and the supply chain was disrupted. For instance, contractors face a difficult road to recover costs in a firm-fixed-price contracts. Contractors have also dealt with less responsive contracting officers due to work from home policies that are still wide-spread in the government.
To address these concerns, various agencies have taken some limited steps to resolve the problems arising from inflation. As an example, the Department of Defense issued a guidance on Inflation and Economic Price Adjustments, providing some relief for certain contractors performing on firm-fixed-price contracts.
Similarly, the SBA’s latest action, which goes into effect on December 19, seeks to ease at least some inflation pains amongst small businesses. Specifically, the Interim Final Rule includes the following major actions:
- Adjusting the economic disadvantage thresholds applicable to the 8(a) Business Development and Economically Disadvantaged Women-Owned Small Business (EDWOSB) programs, and the dollar limit for small business size standards for certain industries.
- SBA also adjusted three program-specific monetary size standards including:
- Size standards for sales or leases of government property;
- Size standards for stockpile purchases; and
- Alternative size standard based on tangible net worth and net income for the Small Business Investment Company (SBIC) program”
1. Adjustment to 8(a) BD and EDWOSB Programs and Increase to the Monetary Small Business Size Standards
In the past, the SBA increased the revenue-based small business size standards based on certain industries, such as manufacturing or retail trade. Uniquely, the Interim Final Rule, which will be effective this month, adjusts “all” receipts-based size standards by multiplying the current size standards by 1.1365 and rounding the final number to the nearest $500,000.
For instance, the below chart shows the comparison between the current size standards and the inflation adjusted size standards of certain industries. A complete list of industries can be accessed here.
|NAICS 2022 code||NAICS 2022 industry title||Current size standards ($ million)||Inflation- adjusted size standards (rounded) ($ million)|
|236210, 237110, 237310||Industrial Building Construction; Water and Sewer Line and Related Structures Construction, Highway; Street, and Bridge Construction||39.5||45.0|
|238120||Structural Steel and Precast Concrete Contractors, Roofing Contractors||16.5||19.0|
|485112||Commuter Rail Systems||41.5||47.0|
|541420||Industrial Design Services||15.0||17.0|
|562112||Hazardous Waste Collection||41.5||47.0|
The Interim Final Rule adjusts for inflation for the 8(a) business development (“8(a) BD”) program, as well as economically disadvantaged women-owned small business (“EDWOSB”). For instance, the dollar limit for total 8(a) contracts is adjusted from $100 million to $168.5 million. The following graph shows other inflation adjustments for the 8(a) BD and EDWOSB.
|Name||Value||Adjusted Threshold (rounded)|
|8(a) Business Development Economic Disadvantage Thresholds|
|Net worth (13 CFR 124.104(c)(2))||$750,000||$850,000|
|Income (AGI) (13 CFR 124.104(c)(3))||$350,000||$400,000|
|Total assets (13 CFR 124.104(c)(4))||$6,000,000||$6,500,000|
|Net worth (13 (CFR 127.203(b)(1))||$750,000||$850,000|
|Income (13 (CFR 127.203(c)(3) (i))||$350,000||$400,000|
|Total assets (13 CFR 127.203(c)(4))||$6,000,000||$6,500,000|
2. Adjustment to “Program-Based” Size Standards While most SBA and/or federal programs use size standards based on industry types that are defined by the NAICS, the SBA also uses size standards on a “program basis,” including size standards for “sales or leases of government property,” “stockpile purchases,” and “SBIC alternative size threshold.” The Interim Final Rule granted inflation adjustment to the program-based size standards. A complete list of program-based size standards can be accessed here.
 U.S. Small Business Administration, Small Business Size Standards: Adjustment of Monetary-Based Size Standards, Disadvantage Thresholds, and 8(a) Eligibility Thresholds for Inflation, https://www.federalregister.gov/documents/2022/11/17/2022-24595/small-business-size-standards-adjustment-of-monetary-based-size-standards-disadvantage-thresholds (Nov. 17, 2022).