Government contracting is a great way to help grow a business, as well as a way to open the door to new and exciting opportunities for a small business. Determining the size standard of a business is a must for government contracting, and can help establish appropriate procurements for a small business. Once a size standard is determined and all other registrations are complete, a small business is ready to enter the government contracting market. Visit Register for Government Contracting for more information.
A size standard is usually stated in number of employees or average annual receipts and represents the largest size that a business (including its subsidiaries and affiliates) may be to remain classified as a small business for SBA and federal contracting programs.
Based on those criteria, the SBA has established the following standards for a small business:
- 500 employees for most manufacturing and mining industries, and
- $7 million in average annual receipts for most non-manufacturing industries.
In order for a business to be eligible for government contracts, they must be certified as a “small business concern,” in addition to qualifying as a small business under the criteria and size standards in Title 13, Code of Federal Regulations, part 121 (13 CFR §121).
A “small business concern” is a small business that is not dominant in the field of operation for which it is bidding on a government contract.
Where to Find Size Standards
- Size standards have been established for types of economic activity, or industry, generally under the North American Industry Classification System (NAICS).
- SBA's size regulations pertaining to federal procurement are also found in the Federal Acquisition Regulation, 48 CFR Part 19.
Designating the Size Standard
For federal contracts, the contracting officer designates the size standard of the procurement by selecting the size standard in effect on the date the solicitation is issued. The basis for designation, again, is NAICS.
When more than one NAICS is involved in a contract, consideration is given to the function of the goods and services being purchased and the relative value and importance of each.
SBA has established a Table of Small Business Size Standards, which is matched to the NAICS industries for guidance.
Also check out Summary of Size Standards by Industry.
Determining the Size of a Business Concern
To bid on a federal contract, a concern must self-certify that it is a small business under the appropriate size standard in the solicitation. The size of the concern at the time of self-certification is what SBA considers to prevail for the contract. There are two exceptions to this rule:
- A business concern is an applicant for a Certificate of Competency (COC) relating to an unrestricted procurement. The size standard will then be determined as the date of the concern's application for the COC.
- For compliance with the Non-Manufacturer Rule, the size standard is determined as of the date of the best and final offer.