The Small Business Act tells the federal government why small business contracting exists: to preserve free competitive enterprise, ensure small businesses receive a fair proportion of federal contracts, and strengthen the nation’s economy. If firms with $500 million in revenue are allowed to position themselves as “small” to access set-aside contracts, it would undermine the core congressional intent of the Small Business Act.
The goal isn’t simply to broaden who qualifies as “small”; it’s to preserve a competitive space where small businesses compete exclusively with other small businesses. The proposed shift in size standards will dilute opportunities for truly innovative small and emerging firms. The companies that traditionally fuel our nation’s industrial base and national security with new technologies, agile solutions, and disruptive capabilities. If the competitive landscape becomes more crowded with large firms, small and early‑stage firms will struggle to gain traction, secure past performance, and scale into meaningful contributors within federal acquisition pipelines.
Those of us who have led the U.S. Small Business Administration’s Office of Government Contracting and Business Development — the office responsible for overseeing more than $180 billion in small‑business contracts — understand that size standards are the gateway to small‑business participation. Size standards determine eligibility for set‑asides, 8(a), HUBZone, women-owned small business, and service-disabled veteran-owned small business programs, shape mentor‑protege joint‑venture opportunities, and anchor the broader ecosystem of small‑business subcontracting across the federal marketplace.
Increases are necessary. This unprecedented magnitude is not
We agree that size standards must rise. What concerns us is the magnitude of the proposed changes and the process being used to implement them.
On Aug. 20, SBA simultaneously proposed a rewritten size-standards methodology and new standards covering receipts-based and employee-based industries in federal contracting and loan programs. Nearly 1,000 six-digit standards would be consolidated into 338 broader industry groupings, exceptions would disappear, and many thresholds would increase substantially.
In computer systems design and related services, for example, the proposed standard would rise from roughly $34 million to $531 million. Engineering services would move from $25.5 million to $252 million. SBA estimates that more than 110,000 large firms would immediately qualify as small.
A $40 million company and a $450 million company do not necessarily compete on equal footing. They may have dramatically different balance sheets, past performance, capture resources, and ability to withstand protests or procurement delays. Expanding eligibility, therefore, does not automatically expand meaningful opportunity.
Perhaps the most troubling consequence is the likely effect on industrial base consolidation. Mergers, acquisitions, private equity rollups, and strategic consolidations have steadily reduced the number of independent competitors for federal work, with corresponding price, performance, and innovation risks for federal agencies. SBA’s proposal could accelerate M&A activity among federal contractors, further increasing price, performance, innovation, technical, and supply-chain risks. Size policy is industrial-base policy. If set-aside competitions suddenly include firms many times larger than the businesses these programs were designed to develop, emerging companies could face significantly different competitive conditions. New entrants in federal contracting face consistent headwinds that stretch across 15 years. Forcing new entrants to compete alongside firms with revenues exceeding $500 million will further exacerbate the situation, and all but eliminate opportunities for true start-ups.
The process matters just as much as the numbers
Historically, SBA’s review process gave stakeholders time to evaluate methodology and then examine its effect on individual industries. That sequencing allowed agencies, contractors, trade associations, and the industrial base community to analyze bidder pools, small-business goals, mentor-protege strategies, affiliations, and supply chain risks.
This time, SBA released the revised methodology and proposed standards together with a 30-day comment period.
Stakeholders cannot meaningfully evaluate hundreds of proposed standards without understanding and stress-testing the methodology that produced them.
SBA’s concern that standards set too low can force successful businesses out of small business programs prematurely is valid. But the answer should not be to move the line so dramatically that the distinction between small and mid-market is eliminated.
Size policy requires balance: standards should be high enough to allow successful firms to grow, but low enough to preserve meaningful opportunities for genuinely small and emerging businesses.
We are asking SBA to take three steps
First, restore a sequential review process: finalize the methodology after adequate time for public comments, then evaluate receipts-based and employee-based standards with adequate opportunity for analysis and response.
Second, ensure that decisions regarding increases or reductions are supported and explained industry by industry.
Finally, raise standards where the data support it. Address the growth penalty. Modernize the system.
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Those of us signing this statement served in senior SBA leadership roles under different administrations. We did not always agree on every program detail. But we agree that size standards are too important to small businesses, competition, the industrial base, and the government’s buying power to be rewritten without sufficient time and scrutiny.
The consequences of these changes will impact federal procurement for years to come. Thirty days is not sufficient to identify, mitigate, and plan for appropriate size standards, whether they be too high or too low.
A. John Shoraka, Joe Jordan, Jackie Robinson-Burnette, and Frank Spampinato each led the Small Business Administration’s Office of Government Contracting and Business Development, the office that oversees more than $180 billion in small business contracts a year.
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[ H/T Washington Examiner ]
