Proposed SBA Size Standards Could Reshape Competition for Federal Set-Aside Contracts

Additional contributor: Law Clerk, Max Sarkissian

Summary

The U.S. Small Business Administration (“SBA”) is considering substantial increases to the size standards used to determine eligibility for federal small-business contracting programs. The proposals could allow larger companies to enter or reenter set-aside markets while helping growing contractors remain eligible for small-business opportunities.

SBA has extended the deadline for comments on the proposed standards and related methodology to November 20, 2026.

The competitive effects are likely to vary significantly by industry. Contractors should evaluate the specific proposed standard applicable to each NAICS code they use rather than relying on SBA’s aggregate estimates.

Potentially Significant Increases

The proposed rule would revise standards applicable to 338 industry groups and industries. It would also consolidate numerous standards at broader four-digit or five-digit NAICS levels.

Examples identified in reporting about the proposal include potentially substantial increases for:

• Computer systems design and related services
• Administrative management and general management consulting services
• Advertising, public relations, and related services
• Certain financial investment activities

For example, the receipts threshold associated with Administrative Management and General Management Consulting Services, NAICS 541611, reportedly could increase from $24.5 million to approximately $295 million.

Each reported figure should be checked against SBA’s official proposed tables before a company relies on it or includes it in public comments.

Competing Views of the Proposal

Supporters of higher standards contend that existing thresholds can force successful companies out of the small-business marketplace before they are prepared to compete against the largest federal contractors. This problem can be particularly significant in technology, defense, professional services, and other markets where past performance, contract vehicles, security requirements, and access to capital create substantial barriers to unrestricted competition.

Critics argue that some proposed standards are so high that they would allow companies with materially greater resources to compete against emerging contractors for the same set-aside contracts. Those resources may include:

• Larger workforces
• Greater access to working capital
• More extensive past performance
• Established proposal and business-development teams
• Multiple contract vehicles
• Greater ability to absorb bid and performance risk

The relevant question may not be whether a higher standard is appropriate in general, but whether the increase is properly calibrated to competitive conditions in each market.

Who May Be Affected

The proposal may affect:

• Current small-business prime contractors and subcontractors
• Contractors approaching an existing size limit
• Former small businesses that could regain eligibility
• Participants in SBA socioeconomic contracting programs
• Prime contractors with small-business subcontracting plans
• Mentor-protégé participants and joint ventures
• Agencies conducting market research for set-aside acquisitions
• Investors or potential acquirers of government contractors

The changes could also affect acquisition planning. A larger qualifying pool may influence agency market research, set-aside decisions, subcontracting strategies, and assessments of whether adequate small-business competition exists.

Questions Contractors Should Ask Now

Companies should consider:

1. Would the company remain or become small under the proposed standard?
2. Which existing competitors could become newly eligible?
3. Would broader NAICS groupings combine materially different business models?
4. Could changes affect the company’s eligibility for specific contract vehicles?
5. Would the proposal alter the company’s teaming or mentor-protégé strategy?
6. Could it affect a planned acquisition, investment, or restructuring?
7. What procurement data would demonstrate the likely competitive effect?

Recommended Actions

Before the November 20, 2026 deadline, contractors should model the effect of the proposed standards on current and anticipated procurements. Useful information may include award history, bidder size, procurement values, market concentration, staffing requirements, and the availability of qualified small businesses.

Comments may recommend retaining the current standard, adopting a smaller increase, preserving a six-digit industry standard, creating an industry-specific exception, selecting a different size measure, or phasing in major changes.

Bottom Line

Even if the total number of newly eligible federal contractors is comparatively limited, the impact could be concentrated in high-value and heavily competed markets. Companies should evaluate the proposal at the NAICS-code and procurement-market levels.

The comment deadline is November 20, 2026. Existing size standards remain in effect while the rulemaking is pending.

Clark Hill’s Government Contracting team can assist contractors in evaluating competitive effects, analyzing procurement data, and preparing comments proposing appropriate industry-specific standards.

Contact Clark Hill

If you have questions about how the final rule may affect your business, contact one of these Clark Hill Government Contracts and Regulations Team attorneys:

• Bret S. Wacker (bwacker@clarkhill.com 202.772.0906)
• Chris White (jcwhite@clarkhill.com 517.318.3011)
• Ronald D. Sullivan (rsullivan@clarkhill.com 202.809.2235)
• Colleen C. Jarrott (cjarrott@clarkhill.com 202.640.6668)
• Gabrielle Long  (glong@clarkhill.com 312.701.6852)
• Contributors: Max Sarkissian, Law Clerk

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