SBA Issues Proposed Rule Intending to Drastically Change SBA Size Standards

On August 20, 2026, the Small Business Administration (“SBA”) issued a proposed rule (RIN 3245-AI67) that proposes new size standards based on a new size standard methodology that “are designed to better reflect the nature of the markets in which small businesses compete.” However, if implemented, the proposed rule would drastically change size standards in various industries, including in the following NAICS Codes:   

As shown by the few examples above, the proposed rule would increase some annual receipts-based size standards by as much as $964 million. The proposed rule does not intend to reduce any current size standards. 

The proposed rule would greatly increase the number of small businesses that would be eligible for set-aside contracts, which would also greatly increase the competition for existing small businesses.  For example, in relation to engineering services under NAICS code 541330, an existing small business under the current rules with less than $25.5 million in annual receipts would need to compete with newly-eligible small businesses almost ten times their current size if the size standard is increased from $25.5 million to $252 million. Similarly, under NAICS code 541511, Customer Computer Programming Services, existing small businesses with less than $34 million in annual receipts would need to compete with companies more than fifteen times their size if the size standard is increased from $34 million to $531 million in annual receipts. 

Beyond the increase in size standards, the proposed rule also intends to change the NAICS level at which size standards are calculated from the 6-digit NAICS Code to a mix of 4- and 5-digit NAICS codes, which will reduce the number of existing size standards from nearly 1,000 down to 338 individual size standards. The proposed rule also will convert numerous industry groups and industries from receipt-based size standards to an employee-based size standard. 

Government contractors need to review this proposed rule and evaluate the potential impacts on their business. While some businesses will potentially be pleased by the higher size standards that will allow them to compete for set-aside contracts, other businesses will be very displeased by having to compete with businesses with much higher revenues and better access to capital. The proposed rule also will likely cause a robust discussion on the purposes of SBA’s small business program and who it is intended to benefit.  In order for contractors to have a voice in this process, they should submit Public comments, which can be submitted until September 21, 2026.

Conclusion

If implemented, the proposed rule would radically change the existing small business size standards in multiple industries, which could have a significant impact on the availability of set-aside contracts along with the pool of contractors that are able to compete. If you have any questions about proposed rule (RIN 3245-AI67), please contact Josh Mullen, Chris Lockwood, or your regular Womble Bond Dickinson attorney. Womble Bond Dickinson’s Government Contracting Team has extensive experience assisting clients with small business set-aside contracts, including helping companies to comply with SBA’s regulations, establishing SBA mentor-protégé joint ventures, and defending size and status protests.