At the end of 2018, the President signed the Small Business Runway Extension Act. Without much fanfare, the Act delivers a major shakeup to the Federal small business community.
Before the Act, a business would determine its size by calculating its average annual receipts over the three most recently completed fiscal years. With the stroke of a pen, those average annual receipts are now measured over a five year period.
Perhaps predictably, lots of ink was promptly spilled on the internet both hailing and deriding the change. For a fast-growing business, the Act provides a longer runway (hence the name) to remain small and continue to compete for set-aside work. On the other hand, a decelerating business now must include receipts from busier times that could bump it over the size threshold and eliminate future opportunities.
In the midst of all of this angst, Small Business Administration (SBA) decreed in an Information Notice that the Act is not effective immediately. Instead, SBA will roll out implementing regulations on a date to be determined. As things stand right now, that date does not seem to be coming anytime too soon.
So, which standard should contractors use? Three years? Or Five?
The only certainty lies with contractors that are small under either/both metrics. A contractor that is only small under the three-year measurement could face a size protest because it is not small under the Runway Act. On the other hand, a business that is only small under the new five-year standard could be face with the argument that there are no implementing regulation for the new law (and therefore the old three-year period still controls — which is what the SBA itself says).
Candidly, there is no right or wrong answer at this time. Contractors must make calculated decisions based on a number of factors, including where they fall on the size spectrum, the likelihood of a size protest, and what they consider an acceptable amount of risk.
Given the adverse consequences associated with a negative size determine (to say nothing of the cost of defending against a protest), these are decisions that should be approached strategically before deciding to submit a proposal or otherwise hold your business out as small.