Member Article

Due to recent global events causing high inflation, the Small Business Administration (“SBA”) issued a final rule on November 17, 2022. This final rule has two primary components. First, it adopts, without change, the interim final rule published by the SBA on July 18, 2019 that increased in all industry-specific monetary size standards. Second, in an effort to account for inflation that has occurred since 2019, the final rule also increases by an additional 13.65% both the (i) revenue-based size standards for small businesses participating in SBA programs, and (ii) the economic disadvantage thresholds for the SBA’s 8(a) Business Development and Economically Disadvantaged Women-Owned Small Business (EDWOSB) programs. 

Under Section 1344 of the Small Business Jobs Act of 2010, the SBA is required to review its revenue-based size standards and economic disadvantage thresholds at least every five years. SBA performed its last review in 2019. While the SBA would therefore not normally conduct another review and adjustment to its size standards and economic disadvantage thresholds until 2024, the SBA has elected to conduct a mid-cycle review and interim adjustment to account for recent high rates of inflation and price level increases. The changes are effective December 19, 2022. Comments on the interim final provisions (the additional 13.65% adjustment to size standards and eligibility thresholds) are due January 23, 2022. 

Increase in Revenue-Based Size Standards

SBA adjusted all revenue-based size standards by multiplying their current levels by 1.1365 and rounding the results to the nearest $500,000 (except for the agricultural industries for which the results were rounded to the nearest $250,000). Accordingly, each revenue-based size standard has been increased by roughly 13.65%, effective December 19, 2022.

As an example, the size standard for NAICS 541330, Engineering Services, was $22.5 million. The SBA has now adjusted that size standard upwards to $25.5 million.

The SBA’s rule contains a chart of all revenue-based size standards showing the prior size standards and the new, inflation-adjusted size standards.

Small business contractors should consider these increases when determining their eligibility for SBA programs, including the 8(a) program, HUBZone, and small business set-aside procurements.

EDWOSB and 8(a) Program Thresholds

Under the SBA’s EDWOSB and 8(a) programs, individuals seeking to participate in them cannot have a net worth, aggregate gross income, or total assets that exceed certain thresholds. The SBA made inflation adjustments to the eligibility thresholds for the EDWOSB and 8(a) programs to maintain eligibility for participants who otherwise would lose their eligibility due to inflation-led revenue growth.

As of December 19, 2022, the new inflation-adjusted thresholds for the EDWOSB and 8(a) program will be:

SBA 8(a) Program Sole Source Limits

Finally, a non-entity owned 8(a) contractor (i.e. an 8(a) contractor that is not owned by an Indian Tribe, Alaska Native Corporation, Native Hawaiian Organization, or Community Development Corporation) cannot receive sole source 8(a) contract awards where that contractor has received a combined total of competitive and sole source 8(a) contracts in excess of $100,000,000 during its participation in the 8(a) program. To account for inflation, SBA has increased that limit to $168,500,000, effective December 19, 2022.

This article summarizes aspects of the law and does not constitute legal advice. For legal advice for your situation, you should contact an attorney.