Confusion Over Law Expanding Definition of Small Business

SBA Says Rule Not Immediately Effective

On Dec. 17, 2018, the Small Business Runway Extension Act (H.R. 6330), which modifies the method for assigning size standards for small businesses, was signed into law. The law modifies Small Business Administration (SBA) reporting requirements to allow businesses to report average earnings over the last five years, rather than three. As AGC has previously reported, the law will need to go through the usual public notice and comment process before small businesses will receive the full benefits of the expanded lookback period. The SBA has acknowledged that there has been some confusion as to whether the five year look back period is effective immediately. SBA recently issued an Information Notice to all of the agency’s Government Contracting and Business Development employees stating: “The change made by the Runway Extension Act is not presently effective and is therefore not applicable to present contracts, offers, or bids until implemented through the standard rulemaking process”… “Until SBA changes its regulations, businesses still must report their receipts based on a three-year average.”

SBA requires that businesses report their average gross receipts over the previous three years in order to be categorized as a "small" business, including for federal contractors.  According to the congressional report, the “modification of SBA’s size formula is designed to reduce the impact of rapid-growth years which result in spikes in revenue that may prematurely eject a small business out of their small size standard.”

To view the text of the bill, click here.

To view the congressional report, click here.

For more information, contact Jordan Howard at jordan.howard@agc.org or (703) 837-5368.


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