Small business size standards

In order to compete for set-aside contracts, a business must meet SBA’s size standards – the maximum size a business can be to qualify as small. Businesses can self-certify as small in the System for Award Management (SAM) database.

To check the size standards for specific industries, you can reference SBA's table of small business size standards. The table lists the current size standards that correspond to individual NAICS codes. Contracting officers must designate a NAICS code for a contract according to Title 13 Part 121.402 of the Code of Federal Regulations (CFR).

You can find small business size regulations in 13 CFR 121.

The regulations in 13 CFR 121.401 through 121.413 apply to all federal contracting programs for which small business status is required or advantageous, including the small business set-aside program.

There are some common terms you should be familiar with to help you ensure that a business is classified correctly as small.

• Affiliates: You must include the employees or receipts of all affiliated when determining the size of a business. Affiliation with another business is based on the power to control, whether exercised or not, or whether a third party controls or has the power to control multiple businesses. The power to control exists when an external party has 50 percent or more ownership. It may also exist with considerably less than 50 percent ownership by contractual arrangement or when one or more parties own a large share compared to other parties. Check SBA’s compliance guide for size and affiliation for more detailed information.

• Annual receipts: This is the “total income” (or “gross income”) plus the “cost of goods sold.” These numbers can normally be found on the business’ IRS tax return forms. Receipts are averaged over a business’ latest three complete fiscal years to determine the average annual receipts. If a business hasn’t been in business for three years, multiply its average weekly revenue by 52 to determine its average annual receipts.  

• Employee calculation: This is the average number of people employed for each pay period over the business’ latest 12 calendar months. Any person on the payroll must be included as one employee regardless of hours worked or temporary status. The number of employees of a concern in business less than 12 months is the average for each pay period that it has been in business.

You can find the full definitions of these terms, and others, in 48 CFR 19. 

The SBA Administrator establishes size standards. The Office of Size Standards makes recommendations to the Administrator for establishing or revising size standards, according to changes in industries and the economy. When making these recommendations, the office uses the most recent NAICS codes available

The Size Standards Methodology White Paper explains SBA’s process for establishing, reviewing, and modifying size standards.

You can follow announcements about updating size standards from the Office of Size Standards.

Any interested party, including the contracting officer in certain situations, may protest a winning bidder’s self-certification as a small business.

The protester should send specific reasons for why they believe the winning business is not small to the contracting officer. The contracting officer must then promptly forward the protest to the SBA Government Contracting Area office that serves the location of the protested business’ headquarters.

The contracting officer’s referral must contain the following information:

• The size protest and any accompanying materials
• A copy of the self-certification as to size
• Identification of the applicable size standard
• A copy of the solicitation
• Identification of the date of bid opening or notification provided to unsuccessful offerors
• The date the protest was received
• A complete address and point of contact for the protested concern

The complete procedures for submitting and handling a size protest are outlined in 13 CFR 121.1001.

Individuals may also appeal the NAICS code designation of any contract. SBA’s Office of Hearings and Appeals handles these appeals, in accordance with 13 CFR 121.1102-03 and 134 Subpart C.

Office of Size Standards
409 3rd St., SW
Mail Code 6530, 8th Floor
Washington, DC 20416
sizestandards@sba.gov
Phone: 202-205-6618
Fax: 202-481-1749