The U.S. Small Business Administration is raising the minimum size for engineering, construction and other companies to be classified as “small,” a move that the agency expects will increase the number of firms eligible for SBA loans and set-aside contracts.
SBA said on July 23 that it has issued an interim final rule spelling out the various new revenue thresholds, which it says will rise by about 8% from the current levels. The new standards will take effect on Aug. 19. [View July 18 Federal Register notice here.]
The agency said the increases are an adjustment to account for inflation since its last inflation-related increase, which took place in 2014. [View current size standards for all industries here. Scroll down or search document for "construction," "engineering," "architectural services".]
The new standards come soon after SBA issued a proposal to allow small businesses to calculate their average receipts—for size-standard purposes—over five years, compared with three years now.
Jordan Howard, director of the Associated General Contractors of America’s federal and heavy construction division, said in an interview that the combination of the increased SBA size standard and the proposed longer “lookback” revenue-averaging period “makes this a significant year for small federal construction contractors.”
Steve Hall, American Council of Engineering Companies senior vice president for advocacy and external affairs, said in an interview that the higher size standard “allows for some growth for small firms.”
SBA estimates that the higher standards will allow 90,000 additional companies to qualify as small businesses and could result in up to $750 million more in federal small-business contracts, plus as many as 120 more small-business loans totaling about $65 million.
For construction firms that fall into the various buildings construction and heavy and civil engineering construction sub-categories, the new threshold will be set at average annual receipts of $39.5 million. That’s a hike of $3 million, or 8.2%, from the current level.
An exception is dredging and surface cleanup companies, whose new threshold will be $30.0 million, up from the present $27.5 million.
For companies in the specialty trade contractors category, the new benchmark is $16.5 million, up 10% from the current mark.
For engineering services, SBA’s new threshold is $16.5 million, a 10% boost from the present number.
The exception is small businesses handling engineering contracts and subcontracts awarded under the 1992 Energy Policy Act. Their minimum will be set at $41.5 million, a boost of 7.8%.
For architectural services firms, the new threshold will be $8 million, up 6.7% from $7.5 million now.
Under SBA’s new receipts-averaging proposal, published in the June 24 Federal Register, companies can average their annual receipts for five consecutive years to determine the figure used to meet the agency’s size standard. At present, firms use a three-year average.
That proposal follows the Small Business Runway Extension Act, which became law last Dec. 17. It called for the five-year averaging period.
AGC’s Howard says that some in Congress felt that the three-year period limited small firms’ ability to bid on certain projects. The worry, he says, was that if a company “had a very good year, that might knock them out of the category.”
ACEC has sent information about the size-standard change to its members for comments, Hall says. “We’re still getting feedback from firms and we’ll be engaging SBA further on this.”