SBA Updates Small Business Size Standards and Amends WOSB-Eligible NAICS Codes

SBA Updates Small Business Size Standards

Two weeks ago, on September 27, 2017, the U.S. Small Business Administration (SBA) issued a final rule that adopted proposed revisions to its small business size standards.  Specifically, the final rule implements the U.S. Office of Management and Budget’s (OMB) changes to the North American Classification System (NAICS), which is used by the SBA to set size standards - by industry category - for purposes of determining when businesses are considered small businesses.

OMB’s changes to NAICS (NAICS 2017 Changes) created twenty-one new industry categories by reclassifying, combining and splitting the existing twenty-nine industry categories. The NAICS 2017 Changes changed the 6-digit NAICS code for eight industry categories without changing their definitions or titles, and amended the title of one industry category without changing its six digit NAICS code.  As a result of the SBA’s implementation of the NAICS 2017 Changes, the SBA’s small business size standard increased for six industry categories and part of one industry category and decreased for two industry categories.  And for one industry category, the measurement for determining whether a company is small was changed from a measurement based on average annual receipts to a measurement based on the number of employees.  The final rule, which can be downloaded here, contains a table that shows the changes to the industry categories made by the NAICS 2017 Changes.  The updated size standards are effective as of the beginning of the fiscal year - October 1, 2017.

SBA Amends WOSB-Eligible NAICS Codes

More recently, on October 11, 2017, the SBA issued a Notice updating the NAICS codes for industry categories used under the SBA's Woman-Owned Small Business (WOSB) Program for set-asides and sole source procurements.  Under the WOSB Program, contracting officers can set aside procurements for WOSB’s as long as (1) the acquisition is for a good or service in an industry - as represented by its corresponding NAICS industry category code - in which WOSB’s are substantially underrepresented; (2) there is a reasonable expectation that at least two WOSBs will submit bids; and (3) the award will be made at a fair and reasonable price.  Sole source awards, moreover, are permitted if only one WOSB can perform the contract at a fair and reasonable price.  Similarly, Economically Disadvantaged Women-Owned Small Businesses (EDWOSBs) in NAICS industry codes in which SBA has determined that WOSBs are underrepresented, rather than substantially underrepresented, can also receive set-asides and sole source awards.

In order to align the WOSB Program with the NAICS 2017 Changes (described above), the SBA issued the Notice to amend the NAICS codes that are eligible for use under the WOSB Program.  That is because the NAICS 2017 Changes reduced the number of four-digit industry groups that are eligible for WOSB set-aside procurements from 113 to 112 (which resulted after NAICS groups 5171 and 5172 were merged into NAICS group 5173).  In addition, the NAICS 2017 Changes reduced the number of eligible six-digit NAICS industry category codes for WOSB set-asides from 365 to 364, while leaving the eligible six-digit NAICS industry category codes for EDWOSBs the same.  The reduction in six-digit industry codes was the net result of changes set forth in the Notice and described below to several of six-digit industry category codes that are eligible for WOSB set-asides.

First, NAICS industry category codes 333911 and 333913 were merged into NAICS industry category code 333914, and NAICS industry category codes 512210 and 512220 were merged into NAICS industry category code 512250.  

In addition, in two instances involving industry categories eligible for WOSB set-asides, the six-digit NAICS industry category codes were revised without any change in definition or titles: NAICS industry category code 517110 was changed to 517311; and NAICS industry category code 517210 was changed to 517312.  EDWOSBs are eligible to pursue sole source contracts or set-aside contracts under NAICS industry category code 517311, while WOSBs are eligible to pursue sole source contracts or set-aside contracts under NAICS code 517312.

Lastly, new industry categories were created by splitting two industry categories into two parts with one part of each industry category defined as a separate industry category and combining other parts of the two industry categories to form a separate new industry category.  As a result of this change, NAICS industry category code 541711 now corresponds to 541713 and 541714, while NAICS industry category code 541712 corresponds to 541713 and 541715.

The Notice, which can be downloaded here, includes tables that illustrate the changes to the four-digit group codes and six-digit category codes that were implemented by the 2017 NAICS Changes.

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