If you are an avid SmallGovCon reader and a small business government contractor, you are probably no stranger to at least the basics of SBA’s size standards and its size and affiliation regulations (if not, check out some of our other blogs on the subject and keep an eye out for our upcoming new, second edition of the “SBA Small Business Size and Affiliation Rules” handbook). But either way, did you know, if you are pursuing or participating in one of SBA’s other small business socioeconomic programs (8(a) Program, HUBZone, WOSB, SDVOSB, etc.), there may be additional requirements you must meet regarding your company’s size in order to be eligible for such small business socioeconomic statuses?
I am not going to go too far into the general size standards set by the SBA (and if that is a huge bummer to you, again, no worries–our new, updated handbook on the “SBA Small Business Size and Affiliation Rules” is coming very soon!). But in a very condensed nutshell, each contract set aside by the federal government has an assigned North American Industry Classification System (NAICS) code–and each NAICS code carries a specific size standard with it. To bid on one of those set-aside contracts as a small business (whether you are also 8(a), HUBZone, WOSB, SDVOSB, etc., and whether the contract is also set aside for one of those socioeconomic statuses or not), you have to be considered small under that contract’s NAICS code–using SBA’s rules for calculating your size (found in part 121 of SBA’s regulations). Some size standards are based on annual receipts and some are based on your number of employees–but regardless, you will need to meet the standard set by the specific contract you are bidding, period. The rules I am about to discuss are rules SBA set in addition to the general size rules–so keep that in mind.
8(a) Program
The 8(a) Program, naturally, has some of the strictest rules for qualifying as a small business 8(a) Program participant. I say “naturally” because the 8(a) Program also carries with it some of the most sought after benefits of all of SBA’s programs. Amongst the plethora of other eligibility requirements, the 8(a) Program also lays out detailed rules on maintaining your small business size status. The 8(a) Program’s basic eligibility rule says:
a concern meets the basic requirements for admission to the 8(a) BD program if it is a small business which is unconditionally owned and controlled by one or more socially and economically disadvantaged individuals who are of good character and citizens of and residing in the United States, and which demonstrates potential for success.
You might be thinking at this point, great! I am totally a small business under some of the NAICS codes out there, so I am good right? Well, spoiler alert, that is simply not good enough for SBA’s golden child of socioeconomic statuses. In order to get into the 8(a) Program, you also need to “pick” a primary NAICS code for your company–and be (and remain) small under that size standard too (note: pick is in quotations, as it is not a simple selection process; you must be able to show SBA that is the accurate NAICS code for most of the work you do). The 8(a) Program size rules say:
What size business is eligible to participate in the 8(a) BD program?
(a)(1) An applicant concern must qualify as a small business concern as defined in part 121 of this title. The applicable size standard is the one for its primary industry classification . . .(2) In order to remain eligible to participate in the 8(a) BD program after certification, a firm must generally remain small for its primary industry classification, as adjusted during the program. SBA may graduate a Participant prior to the expiration of its program term where the firm exceeds the size standard corresponding to its primary NAICS code, as adjusted, for three successive program years, unless the firm demonstrates that through its growth and development its primary industry is changing, pursuant to the criteria described in 13 CFR 121.107, to a related secondary NAICS code that is contained in its most recently approved business plan. The firm’s business plan must contain specific targets, objectives, and goals for its continued growth and development under its new primary industry.
So, you not only need to be considered small under the NAICS code of any small business or 8(a) Program set-aside contract you wish to bid–but you also cannot exceed the size standard of your primary NAICS code for three years in a row, or you will get the boot. SBA calls this “early graduation” from the 8(a) Program so you don’t feel quite so bad–but it does mean you are out of the 8(a) Program for good. And if you are sitting there thinking to yourself, “so, I will just pick a higher size standard for my primary NAICS code!” That is easier said than done. To do that, you would need to demonstrate to SBA (through financial documents, taxes, contracts, etc.) that your company did in fact migrate to performing the majority of its work under a different NAICS code. In that regard, the 8(a) Program Definitions say:
A Participant may change its primary industry classification where it can demonstrate to SBA by clear evidence that the majority of its total revenues during a three-year period have evolved from one NAICS code to another.
So, to be a small business 8(a) Program participant, you will need to meet these size rules. And to be a small business 8(a) Program participant that can actually bid on a contract–you will need to meet SBA’s size standard for that contract as well. I will quickly note, there are some affiliation exceptions for Tribal-Owned, ANC, and NHO entities–so keep that in mind if you qualify as one of those and are calculating your size.
SDVOSB/VOSB Program
For the SBA’s SDVOSB and VOSB Program, there are also some additional rules for maintaining a certain size. But they are not quite as strict as the 8(a) Program. SBA’s SDVOSB/VOSB Eligibility rules state:
What are the requirements a concern must meet to qualify as a VOSB or SDVOSB?
(a) Qualification as a VOSB. To qualify as a VOSB, a business entity must be:
(1) A small business concern as defined in part 121 of this chapter under the size standard corresponding to any NAICS code listed in its SAM profile;
(2) Not less than 51 percent owned and controlled by one or more veterans.
(b) Qualification as an SDVOSB. To qualify as an SDVOSB, a business entity must be:
(1) A small business concern as defined in part 121 of this chapter under the size standard corresponding to any NAICS code listed in its SAM profile;
(2) Not less than 51 percent owned and controlled by one or more service-disabled veterans or, in the case of a veteran with a disability that is rated by the Secretary of Veterans Affairs as a permanent and total disability who are unable to manage the daily business operations of such concern, the spouse or permanent caregiver of such veteran.
Additionally, in the SDVOSB/VOSB Definitions, it says the following:
“Small business concern (SBC)” means, a concern that, with its affiliates, meets the size standard corresponding to any North American Industry Classification System (NAICS) code listed in its SAM profile, pursuant to part 121 of this chapter. At the time of contract offer, a VOSB or SDVOSB must be small within the size standard corresponding to the NAICS code assigned to the contract.
Thus, unlike the 8(a) Program rules, which focus solely on your size under your primary NAICS code (as demonstrated by your work history), the SDVOSB/VOSB rules allow you to consider yourself a small business for purposes of inclusion in SBA’s SDVOSB/VOSB Program as long as you are small under at least one of the NAICS codes you have listed in SAM. But don’t forget, that does not automatically qualify you for small business, SDVOSB, or VOSB set-asides–you still need to be small under the NAICS code for the set-aside contract you want to bid.
WOSB/EDWOSB Program
SBA’s WOSB Program and EDWOSB Program also sets some additional size requirements for its participants–but again, not quite as intensely as the 8(a) Program has. In fact, there is a (frankly, quite inexplicable) nuance in these regulations, as the size rules for the WOSB Program participation and EDWOSB Program participation are not the same. Though, generally, these two sets of rules parrot one another (except for the economic disadvantage requirements of the EDWOSB Program)–the size rules do not. SBA’s WOSB/EDWOSB rules state:
What are the requirements a concern must meet to qualify as an EDWOSB or WOSB?
(a) Qualification as an EDWOSB. To qualify as an EDWOSB, a concern must be:(1) A small business as defined in part 121 of this chapter for its primary industry classification; and
(2) Not less than 51 percent unconditionally and directly owned and controlled by one or more women who are United States citizens and are economically disadvantaged.
(b) Qualification as a WOSB. To qualify as a WOSB, a concern must be:
(1) A small business as defined in part 121 of this chapter; and
(2) Not less than 51 percent unconditionally and directly owned and
So, curiously, one could participate in the WOSB Program at any size they want–though, again, they could not bid any small business work or WOSB work if they did not qualify as small for that work’s NAICS code. But to participate in the EDWOSB Program, you must maintain your small business size status under your primary NAICS code to remain in the program (and again, must also be small for any set-aside work you bid). Apparently, this nuance may be the result of some Congressional tinkering and corresponding SBA rule changes–but as of now, we don’t see any changes on the horizon.
HUBZone Program
And last, but certainly not least, is SBA’s HUBZone Program. For the HUBZone Program, SBA’s size rules state:
(1) An applicant concern, together with its affiliates, must qualify as a small business concern under the size standard corresponding to its primary industry classification as defined in part 121 of this chapter.
(2) In order to remain eligible as a certified HUBZone small business concern, a concern must qualify as small under the size standard corresponding to one or more NAICS codes in which it does business.
So, for the HUBZone Program (somewhat similar to, but still not quite as strict as the 8(a) Program size rules), there are sort of two rules. One for getting into the program; and one for staying in the program. To get into the HUBZone program, a company must be small under its primary NAICS code. But once you are in, you can stay in by demonstrating that you remain small under at least one NAICS code in which your company does work. I will also note, there is an exception to these rules for “small agricultural cooperatives” HUBZone’s, which says: “in determining size, the small agricultural cooperative is treated as a ‘business concern’ and its member shareholders are not considered affiliated with the cooperative by virtue of their membership in the cooperative.”
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Whelp, in a nutshell, those are SBA’s rules for participating in its socioeconomic programs for small businesses. These rules–and oh so many more–will be covered in great detail in the upcoming “SBA Small Business Size and Affiliation Rules” handbook, second edition, so keep your eye out for that one!
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