SBA has issued new size standards for industries in the Wholesale Trade and Retail Trade sectors. The interesting thing about these size standards is that they don’t apply to federal procurement actions. Instead, there is a different size standard for supply contracts. So, did SBA see fit to increase the supply-contract size standard?

The answer is no, in the final rule, SBA did not increase the 500-employee size standard for Federal contracts in the Wholesale and Retail Trade sectors. Now, SBA did increase size standards for 57 industries, with 22 industries in NAICS Sector 42 (Wholesale Trade) and 35 industries in NAICS Sector 44-45 (Retail Trade) going up.

The reason for the increase is that the Small Business Jobs Act of 2010 requires SBA to adjust size standards every five years. It’s important to remember that size standards in Sectors 42 and 44-45 cannot be used in Federal contracts for supplies. Rather procurements for Wholesale and Retail Trade sectors use a 500-employee size standard.

As SBA regulations state:

Acquisitions for supplies must be classified under the appropriate manufacturing or supply NAICS code, not under a Wholesale Trade or Retail Trade NAICS code. A concern that submits an offer or quote for a contract, order, or subcontract where the NAICS code assigned to the contract, order, or subcontract is one for supplies, and furnishes a product it did not itself manufacture or produce, is categorized as a nonmanufacturer and deemed small if it has 500 or fewer employees and meets the requirements of § 121.406(b).

13 CFR § 121.402.

So, the prime contractor still has to meet the 500-employee standard under the nonmanufacturer rule. The manufacturer, in turn, must be small (absent a waiver), and the actual manufacturer’s small business status is determined by the solicitation’s NAICS code and its relevant size standard.

SBA is not ignoring the 500-employee standard for the nonmanufacturer rule, however. SBA foreshadows that “in an upcoming proposed rule covering the manufacturing sector and industries with employee-based size standards in other sectors (except Wholesale Trade or Retail Trade), SBA will examine whether the current 500-employee size standard for nonmanufacturers is appropriate and provide a detailed response to the Subcommittee’s comment.” We’ll be sure to keep you posted on that change.

So, the increases in these size standards do not affect procurement. However, they may affect eligibility for certain businesses for things like SBA loans and other types of assistance that are only available to small businesses. As one example, 423140 Motor Vehicle Parts (Used) Merchant Wholesalers is going from 100 to 125 employees. Stay tuned for updates on future size changes.

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