Type: Law Bulletins
Date: 12/12/2019

Changes to SBA's Revenue-Based Size Standards for Small Businesses Effective Jan. 6, 2020

Nearly one year ago, on Dec. 18, 2018, the Small Business Runway Extension Act was signed into law. The law changed the time-period for calculating annual revenues for purposes of the Small Business Administration (SBA)’s receipts-based size standards from a three-year lookback to a five-year lookback. We published two articles (SBA Proposes Rule to Change the Annual Average Receipts Calculation for Small Businesses and Small Business Runway Extension Act of 2018 Amends Size Standard Calculation Period) discussing this change and how it should allow more companies to qualify as a small business for federal contract procurement purposes, for a longer period of time.

The SBA has been slow to implement the new law and there have been several administrative and legal challenges around that decision. But on Dec. 5, 2019, the SBA issued its final rule, available here. The final rule is effective Jan. 6, 2020.

The SBA will implement the new calculation period after the final rule’s effective date. In other words, until Jan. 6, 2020, the SBA will continue to apply the three-year period for calculating average annual receipts for all the SBA’s receipts-based size standards. Since a company’s size is determined as of the date it certifies its size as part of its initial offer which includes price, the three-year calculation period will apply to any offer submitted prior to Jan. 6, 2020.

The final rule includes a two-year transition period, through Jan. 6, 2022. During that two-year period, a company may choose to use either a three-year average or a five-year average to calculate its receipts and the receipts of its affiliates. After Jan. 6, 2022, the five-year average is mandatory.

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