On December 17, 2018, the Small Business Runway Extension Act became law. As we’ve previously written, this Act had a single purpose: to extend the measurement period of the SBA’s calculation of average annual receipts, from three years to five.
We opined that the Act became effective with the stroke of the President’s pen. Just a few days ago, however, the SBA disagreed—according to the SBA, the 5-year calculation period will not become effective until its regulations are revised.
The Small Business Runway Extension Act, signed into law earlier this week, changes the small business size calculation under revenue-based NAICS codes from a three-year to five-year average.
The new law has sparked a great deal of discussion in the government contracting community, with some commentators pointing out that not all small businesses will benefit. But how does the SBA–the agency tasked with implementing the new law–feel?
Well, according to commentary published earlier this year, the SBA thinks the five-year period is a bad idea.
You probably know this already—from what we can tell word is spreading like wildfire—but Monday (Dec. 17, 2018) the president signed the “Small Business Runway Extension Act of 2018” into law.
This changes the period of time the U.S. Small Business Administration uses to measure a business’s size in revenue-based size standards from three years to five years. The law doesn’t say that there will be a period of implementation, so it’s reasonably safe to assume the effect is immediate.
The House and Senate have passed the “Small Business Runway Extension Act of 2018,” which appears poised to become law in the coming days. As my colleague Matt Moriarty has written, the bill would amend the SBA’s small business size rules to use a five-year average, instead of a three-year average, in calculations using receipts-based size standards.
The purpose of the bill is to help contractors avoid becoming “other than small” following a period of quick growth, but not all companies will benefit. For companies with declining revenues, the bill may backfire, causing those companies to be stuck as large businesses longer.
With the stroke of a pen, Congress may have just paved the way for some soon-to-be large businesses to remain small for longer.
Both the House of Representatives and the Senate have passed a bill that would amend the Small Business Act to change the period of measurement used to determine the size of a business from three years to five. The bill awaits the president’s signature to become law.