The SBA's 2019 Size Standards Methodology White Paper explains how it establishes, reviews, and modifies its small business size standards pursuant to the Small Business Act and related legislative guidelines.
The white paper provides the following:
- An overview of legal authority, early legislative history, and regulatory history of small business size standards
- Evaluation of industry structure, federal market conditions, data sources, and calculation of size standards
- Adjustments of size standards for inflation, and adoption of NAICS revisions for size standards
Why has the methodology changed?
As part of the first 5-year comprehensive review of size standards, the SBA established in 2009 a detailed Size Standards Methodology White Paper explaining how the agency determines, reviews, or modifies its small business size standards. SBA has now revised the 2009 Methodology incorporating recent amendments to the Small Business Act involving size standards, addressing public comments to the 2009 Methodology, and making certain analytical improvements.
Major changes to the size standard include:
- Replacing the “anchor” approach used in the 2009 Methodology by a “percentile” approach for evaluating industry characteristics
- Assigning a separate size standard for each NAICS industry instead of selecting a size standard from a limited number of fixed size standards levels
- Lowering the threshold for selecting industries for the evaluation of the Federal contracting factor from $100 million to $20 million in annual Federal contracting dollars
- Applying the 4-firm concentration ratio to all industries
On April 27, 2018, the SBA issued a notification in the Federal Register seeking comments on its proposed revisions to the methodology. The notification also included a discussion of comments the SBA had received on its 2009 Methodology as well as descriptions of and reasons for revising the methodology. SBA received a total 12 valid comments during the 60-day comment period that ended on June 26, 2018. In response, the agency made some changes to the revised white paper, as discussed in its April 11, 2019 Federal Register notification. Comments are available at regulations.gov.
SBA applied this revised methodology for the ongoing second 5-year review of size standards required by the Small Business Jobs Act of 2010.