SBA Comment Period Closes June 27 – Potential Size Standard Change for Manufacturing and Other Industries with Employee-Based Standards
Key Details: The U.S. Small Business Administration (SBA) issued a proposed rule on April 26, 2022, titled “Small Business Size Standards: Manufacturing and Industries with Employee-Based Size Standards in Other Sectors Except Wholesale Trade and Retail Trade.”
This proposed rule includes potential size standard increases for 150 industries. Due to this large potential impact, small business federal contractors are encouraged to understand which North American Industry Classification System (NAICS) codes will be impacted and to submit comments on this proposal by June 27, 2022. For further information and expertise, contact Ryan & Wetmore today.
What Industries Will be Affected by the SBA Size Standard Changes?
The SBA reviewed employee-based small business size standards and has proposed potential changes for the following NAICS sectors:
- Mining, Quarrying, and Oil and Gas Extraction (Sector 21)
- Utilities (Sector 22)
- Manufacturing (Sector 31-33)
- Transportation and Warehousing (Sector 48-49)
- Information (Sector 51)
- Finance and Insurance (Sector 52)
- Professional, Scientific, and Technical Services (Sector 54)
- Administrative and Support, Waste Management and Remediation Services (Sector 56)
Specifically, SBA’s proposed rule sets to increase 150 and retain 282 employee-based size standards within these above sectors.
Changes to Professional, Scientific, and Technical Services Sector
Sector 54 may be of particular interest to businesses as 7 various NAICS codes were reviewed. However, only 1 NAICS had a proposed increase in size standards. NAICS 541715 has a current size standard of 1,250 but is proposed to increase to 1,300. Furthermore, the current 150-employee size standard for IT value-added resellers was also maintained. Interested parties may address these proposals by submitting comments by the June 27 deadline.
How Will the Resellers and Nonmanufacturers Sector be Impacted?
Small business resellers that pursue contracts under the SBA’s Nonmanufacturer Rule depend upon the resale of products manufactured by other companies. One area of the SBA’s proposed rule will be of significant importance to federal resellers as it provides commentary on the size standard for nonmanufacturers.
Under the current SBA Nonmanufacturer Rule, businesses qualify as a nonmanufacturer if they do not exceed the 500-employee alternative size standard. The SBA’s proposed rule indicates the intention to maintain the 500-employee size standard. However, additional analysis provided by the SBA indicates that this size standard should be increased to 550 employees.
The SBA also invited comments on the methodology it utilizes in determining a nonmanufacturer’s size. Feedback has been requested on whether the nonmanufacturer size standard should be based on revenue rather than the number of employees.
Conclusion
Small business contractors and resellers are encouraged to submit comments by June 27, 2022. Furthermore, federal resellers are encouraged to analyze the impact of the proposed rule on your business and long-term strategy. Comments can be submitted via the Federal eRulemaking Portal. SBA has noted that all comments on this proposed rule will be posted. For more information, please contact Ryan & Wetmore today.
About Peter Ryan
Partner, Co-founder, & CPA
Peter T. Ryan co-founded Ryan & Wetmore in 1988 with business partner Michael J. Wetmore. Peter provides clients with the best strategies for success. His expertise extends across various industries. Peter obtained a Master of Business Administration in Finance from the University of Baltimore and a Bachelor of Arts in Accounting from the Catholic University of America.
About Rosie Cheng
Finance Consultant
Rosie Cheng is a Finance Consultant at Ryan & Wetmore. She focuses on government contracting services and produces many of the firm’s government contracting newsletters. Rosie graduated from Georgetown University with a Master of Science in Management and from William and Mary with a Bachelor of Business Administration.