November 29, 2022

SBA Issues Interim Rule to Increase Receipts-Based Size Standards by 13.65% for Inflation

Matt Carter, Dinesh Dharmadasa, Richard Oliver, Aaron Ralph

Pillsbury Winthrop Shaw Pittman LLP

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Pillsbury Winthrop Shaw Pittman LLP

The Small Business Administration’s interim final rule will allow many businesses to regain small business status or remain a small business for longer.

TAKEAWAYS

The SBA adjusted all its receipts-based size standards for inflation, increasing them by 13.65 percent.

For certain size standards, contractors receiving up to $235 million in total receipts over their prior five fiscal years will qualify as small businesses.

The SBA adjusted the 8(a) program’s three standards for initial and continuing eligibility and increased the dollar limit for combined total 8(a) contracts.

On November 17, 2022, the Small Business Administration (SBA) issued an interim final rule for receipt-based size standards, which increases all size standards by 13.65 percent (rounded to the closest $500,000, except for agricultural standards, which are rounded to the closest $250,000) as an additional adjustment for the effect of inflation since 2019. (See our July 22, 2019 Client Alert.) The SBA did not wait “at least every 5 years” to make the inflation adjustment that is required by statute but is making this significant adjustment after three years since its last adjustment for inflation.

The largest receipt-based size standard, which now is $41.5 million, will be $47 million. This substantial increase will have a significant effect for many small businesses. Under the current size standards, for proposals submitted in 2023, small businesses could not have received receipts for their five prior fiscal years totaling more than $207.5 million. Once the interim rule goes into effect on December 19, 2022, small businesses may have receipts up to $235 million, a $27.5 million jump in receipts over the prior five fiscal years.

For the 8(a) program, the three standards for initial and continuing eligibility (net worth, aggregate gross income and total assets) have also been adjusted for inflation. The interim rule would also increase the dollar limit for combined total 8(a) contracts from $100 million to $168.5 million.

Public comments on the interim final rule are due by January 17, 2023.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.