On August 20, SBA published two linked proposed rules that would rewrite how the federal government decides who counts as a small business. This is not the usual inflation adjustment. It is the biggest change to size standards in decades.
Here is what is on the table. SBA would collapse roughly 1,000 industry-specific size standards down to 338, moving from detailed 6-digit NAICS codes to broader 4-digit and 5-digit groupings. It would raise thresholds across the board and reduce none of them. Some revenue-based standards would jump by as much as $964 million.
The examples are eye-opening. Computer Systems Design Services under NAICS 541512 would go from $34 million to $531 million. Semiconductor manufacturing would move from 1,250 employees to 2,800. Shipbuilding would go from 1,300 to 2,300.
The scale: roughly 114,500 firms would newly qualify as small. About 37,000 of them already hold federal contracts, worth around $71 billion in FY25.
The methodology behind it is new too. SBA is dropping the 2024 framework in favor of a market-size approach borrowed from how DOJ and FTC define a relevant market in merger reviews, adding regional considerations, eliminating size standard caps, and adjusting not just for inflation but for productivity growth.
Comments are due September 21.
Source: Federal Register - Federal Register :: Small Business Size Standards
Analysis: Holland & Knight - SBA Proposes Sweeping Overhaul of Small Business Size Standards | Insights | Holland & Knight
Why GovCons Should Care
If this goes final, the set-aside pool you compete in changes overnight.
Say you run a $20 million IT services firm. Today you compete against firms up to $34 million. Under the proposal, you could be bidding against a company with half a billion in revenue, deeper bench strength, better access to capital, and a full-time capture team. Same set-aside. Same evaluation.
Now flip it. If you are a firm bumping against the ceiling, this is oxygen. Instead of being pushed out of small business status just as you hit your stride, you get years of additional runway, and you can take non-set-aside work without worrying about growing yourself out of eligibility.
Either way, three things need to happen on your end. Check your primary NAICS codes against the proposed tables. Reassess your teaming and mentor-protege plans, since your partners’ status may change too. And get a comment in before September 21, because this is the moment where the record gets built.
Two Sides of the Debate
One side says this is overdue. Standards have not been meaningfully adjusted since 2022 and never accounted for productivity growth, so firms were getting punished for becoming more efficient. Companies deliberately stopped growing to protect their status, which is the opposite of what the program should encourage. Broader categories mean less confusion about which code applies. And more qualified bidders means agencies get better competition and better prices.
The other side says this hollows out the point of a set-aside. A program built to give genuinely small firms a foothold does not work if a $500 million company sits in the same pool as a $20 million one. The small business share of federal dollars has been shrinking and the number of participating firms has dropped sharply over the past decade. Adding 37,000 larger competitors to that shrinking pot does not fix the problem, it accelerates it. Critics also note that raising every standard while lowering none looks less like recalibration and more like expansion for its own sake.
Your Turn
Pull up your primary NAICS code and look at the proposed number. Does this give your firm room to grow, or does it hand your set-aside competition a company ten times your size?
Tell us what you think in the comments below.