SBA Proposes Rule to Use 24-Month Period to Calculate Number of Employees

The SBA has released a proposed rule to use a 24-month period to calculate a company’s number of employees for eligibility purposes in all of SBA’s programs. This change will affect any business seeking to qualify as small under an employee-based NAICS code, such as those applicable to manufactured products.

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COFC Confirms SBA Interpretation of Runway Extension Act

The Court of Federal Claims recently reviewed the Small Business Runway Extension Act, particularly SBA’s contention that it was not bound by the 5-year lookback period that Congress enacted for size receipt calculations. Now, SBA has issued its own rule that it will use the 5-year lookback period, at least after a two-year transition period, as discussed in our earlier posts. But there were still some cases working their way through the courts that examined how Congress implemented the Runway Extension Act and whether it applied to SBA or not. To make a long story short, the court agreed with SBA.

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Solicitation Omits NAICS Code and Size Standard–But Agency Still Rejects Large Business’s Bid

An offeror’s bid was rejected because the offeror wasn’t a small business–even though the solicitation didn’t contain a NAICS code or corresponding size standard.

It sounds like a successful bid protest waiting to happen, but GAO didn’t see it that way. Instead, GAO dismissed the protest because the offeror should have protested the defective solicitation terms before it submitted its bid, instead of waiting to see how the competition played out.

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Congress Should Codify–and Expand–SBA’s Solution to the “Runway Extension” Small Business Size Calculation Problem

In January 2022, the rules regarding calculating small business size status for federal procurements will change dramatically. Companies operating under receipts-based size standards will be required to use their last five completed fiscal years–not three. And businesses operating under employee-based size standards will be made to use their last 24 months of payroll, instead of 12.

These changes will benefit growing businesses, allowing stay small longer by including older numbers in their averages. But the new size rules–what Congress has termed a small business “runway extension”–actually penalize some businesses, forcing them to stay large longer, and freezing these companies out of the very small business set-aside opportunities that could help reverse their declining fortunes. That can’t be what Congress intended!

Fortunately, the SBA has come up with a simple, elegant solution to the problem, and I think Congress should codify it before January.

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Congress Lengthens Employee-Based Size Standard Period

If you’re a regular SmallGovCon reader (and we hope you are!), you probably are familiar with the Small Business Runway Extension Act. Under the Runway Extension Act, Congress lengthened the period used to determine small business status under receipts-based size standards, from three to five years. Congress’s laudable goal was to allow businesses to “stay small” longer, but the Runway Extension Act can backfire when a business has been shrinking instead of growing.

Now, Congress has done it again. In the Conference Report to the 2021 NDAA, Congress has extended the period used to measure employee-based size standards, from 12 to 24 months–and whether this is good news may depend on if a business has been growing or shrinking.

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SBA Proposes Increasing Size Standards in Professional, Management, and Administrative Industries

SBA’s recent proposed rule will increase size standards for a number of industries. The rule also said that SBA was thinking about lowering size standards. While most often, size standards increase over time, SBA can also lower them. However, SBA decided against lowering them. Read on for what standards will change.

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