SBA Issues White Paper on its Size Standards Methodology
The SBA has revised its White Paper on its Size Standards Methodology, effective September 12, 2024.
The SBA's 2024 Size Standards Methodology White Paper explains how it establishes, reviews, and modifies its small business size standards pursuant to the Small Business Act and related legislative guidelines.
The white paper provides the following:
- An overview of legal authority, early legislative history, and regulatory history of small business size standards
- Evaluation of industry structure, federal market conditions, data sources, and calculation of size standards
- Adjustments of size standards for inflation, and adoption of NAICS revisions for size standards
Why has the methodology changed?
As part of the second 5-year comprehensive review of size standards in 2019, SBA established a detailed Size Standards Methodology White Paper explaining how the agency determines, reviews, or modifies its small business size standards. SBA has revised the 2019 Methodology, incorporating recent amendments to the Small Business Act involving size standards, addressing public comments to the 2019 Methodology, and making certain analytical improvements.
Major changes to the size standard include:
- Replacing the previous approach to account for the Federal contracting factor with the “disparity ratio” approach
- Using The Federal Procurement Data System – Next Generation (FPDS-NG) and The System for Award Management (SAM) data to compute the 20th percentile and 80th percentile values of industry factors for evaluating size standards at subindustry levels (“exceptions”), instead of having those calculated based on the Economic Census data
- Updating the minimum and maximum size standard levels
- Updating the 20th percentile and 80th percentile values of industry factors, derived from the latest 2017 Economic Census and other industry data, used to evaluate the structure of each industry
On December 11, 2023, the SBA issued a notification in the Federal Register seeking comments on its proposed revisions to the methodology. The notification also included a discussion of comments the SBA had received on its 2019 Methodology as well as descriptions of and reasons for revising the methodology. SBA received a total 21 valid comments during the 60-day comment period that ended on February 9, 2024. In response, the agency made some changes to the revised white paper, as discussed in its September 12, 2024 Federal Register notification. Comments are available at Regulations.gov.
SBA will apply this revised methodology for the forthcoming third 5-year review of size standards required by the Small Business Jobs Act of 2010.