Qualifying as a small business under the Small Business Administration’s (“SBA”) size standards opens a wealth of opportunities for businesses seeking to contract with the federal government. In deter mining the size of a business under SBA regulations, the SBA looks to the industry in which the business operates, its annual revenue, and/or the number of employees. The SBA modifies the size standards for each industry every five years. Thus, a business that might qualify as a small business one year, might no longer qualify the next, and vice versa. The SBA publishes its size standards via the North American Industry Classification System (“NAICS”), which organizes each standard by sector and further divides each sector by industry.
On May 25, 2021, the SBA proposed new rules that would modify the standards for many businesses in the Wholesale Trade and Retail Trade industries. In Wholesale Trade – where the size standards are based on the amount of average annual receipts –the SBA proposed to increase the size standards for only 14 of the 71 industries in that sector:
- Motor Vehicle Parts (Used) Merchant Wholesalers
- Roofing, Siding, and Insulation Material Merchant Wholesalers
- Ophthalmic Goods Merchant Wholesalers
- Coal and Other Mineral and Ore Merchant Wholesalers
- Household Appliances, Electric Housewares, and Consumer Electronics Merchant Wholesalers
- Warm Air Heating and Air-Conditioning Equipment and Supplies Merchant Wholesalers
- Transportation Equipment and Supplies (except Motor Vehicle) Merchant Wholesalers
- Toy and Hobby Goods and Supplies Merchant Wholesalers
- Printing and Writing Paper Merchant Wholesalers
- Confectionery Merchant Wholesalers
- Other Farm Product Raw Material Merchant Wholesalers
- Other Chemical and Allied Products Merchant Wholesalers
- Petroleum Bulk Stations and Terminals
- Wholesale Trade Agents and Brokers
For the Retail Trade sector, in which the standards are based on the number of the business’ employees, the SBA proposed to increase the size standard for 35 of the 66 industries:
- Automotive Parts and Accessories Stores
- Tire Dealers
- Window Treatment Stores
- All Other Home Furnishings Stores
- Household Appliance Stores
- Hardware Stores
- Outdoor Power Equipment Stores
- Nursery, Garden Center, and Farm Supply Stores
- Baked Goods Stores
- Confectionery and Nut Stores
- All Other Specialty Food Stores
- Beer, Wine, and Liquor Stores
- Pharmacies and Drug Stores
- Optical Goods Stores
- Food (Health) Supplement Stores
- Art Dealers
- All Other Miscellaneous Store Retailers (except Tobacco Stores)
- All Other Health and Personal Care Stores
- Other Gasoline Stations
- Men’s Clothing Stores
- Clothing Accessories Stores
- Other Clothing Stores
- Jewelry Stores
- Luggage and Leather Goods Stores
- Sporting Goods Stores
- Hobby, Toy, and Game Stores
- Musical Instrument and Supplies Stores
- Book Stores
- News Dealers and Newsstands
- Warehouse Clubs and Supercenters
- Gift, Novelty, and Souvenir Stores
- Used Merchandise Stores
- Pet and Pet Supplies Stores
- Vending Machine Operators
- Other Direct Selling Establishments
These proposed changes are based on calculations of various industry factors, including the structure of the industry and the success that small businesses have in that industry when contracting with the federal government. 86 Fed. Reg. 28,012 (May 25, 2021). Notably, the SBA is proposing to maintain the existing size standards for the remaining industries in the Wholesale and Retail industry, recognizing the economic impact that the COVID–19 pandemic had on many companies. Id. at 28,029 (May 25, 2021).
The SBA is seeking comments on these proposed rules on or before July 26, 2021.
For questions or assistance regarding the proposed rules, submitting comments on them, or how the rules may impact your business, you can contact the government contract attorneys at Eckland & Blando.