As we previously reported, on September 10, 2014, the SBA released proposed increases to the small business standards for many industries that use employee-based size standards. The final rule is scheduled to be published on January 26, 2016; however, a pre-publication of the final rule is available now at www.federalregister.gov.
According to the pre-publication, the SBA will adopt most of the proposed changes with two key exceptions. The SBA is not increasing the Environmental Remediation Services (“ERS”) exception under NAICS 562910 from 500 employees to 1,250 employees and it is not eliminating the Information Technology Value Added Resellers (“ITVAR”) exception under NAICS 541519 (Other Computer Related Services).
Regarding NAICS code 562910, the SBA explained that following its evaluation of public comments to the proposed substantial size increase, as well as its evaluation of more recent data, the SBA decided to increase the size standard for the ERS exception under NAICS 562910 from 500 employees to 750 employees, which is considerably lower than the initially proposed size standard increase to 1,250 employees. The SBA estimates that, as a result of the size standard increase, approximately 10-15 additional firms will likely gain small business status which the SBA believes will not significantly impact the small businesses that currently have fewer than 500 employees.
The SBA has also determined it will not eliminate the ITVAR exception to NAICS 541519 and that it will maintain the 150 employee size standard for this code. However, the SBA will modify Footnote 18 of the size standard table to require supply components of small business set-aside ITVAR contracts to comply with manufacturing performance requirements or to comply with the nonmanufacturer rule by supplying the products of small business concerns, unless SBA has issued a class or contract specific waiver.
With regard to the Research and Development exceptions under NAICS 541712, the SBA is adopting modified exceptions and the size standards will either remain the same, or be increased from 1,000 employees to 1,250 employees.
According to the pre-published report, the final size standard increases in these industries will be effective on February 26, 2016. To view a complete copy of the pre-published final rule and/or to view a summary of the SBA’s revised adopted size standards, click here. If you have any questions about the size standard increases, please contact Pam Mazza or Jon Williams at pmazza@pilieromazza.com, jwilliams@pilieromazza.com, or 202.857.1000.