SBA Adopts Five-Year Receipts Calculation: What It Means for Government Contractors

The Small Business Administration (SBA) has introduced a significant change to the receipts-based size calculation for determining business size. This shift, effective January 6, 2020, stems from the Small Business Runway Extension Act of 2018 and aims to help small businesses maintain their “small” designation for a longer period.

Key Highlights of the New Rule

The SBA’s new rule changes the period of measurement for receipts-based size standards from three years to five years. Here’s what contractors need to know:

1. Transition Period:
   Businesses can choose to use either the three-year or five-year calculation until January 6, 2022.

2. Mandatory Compliance:
   After January 6, 2022, all businesses must adopt the five-year period for calculating average annual receipts.

3. Scope of Impact:
   The five-year calculation applies to all receipts-based size standards under SBA regulations, except for the SBA Business Loan and Disaster Loan Programs. These programs will adopt the new calculation in future rulemaking.

Why This Matters for Small Businesses

This change offers a significant advantage to small businesses, allowing them to sustain their small-business designation for a longer period. For many contractors, this extended timeline provides additional opportunities to compete for contracts set aside for small businesses while continuing to grow.

Looking Ahead

While this adjustment has been in the works for nearly a year, it carries far-reaching implications for government contractors. Understanding how the new calculation affects your business is crucial for planning and compliance.

For guidance on navigating these changes and ensuring your business remains competitive, consult with experienced compliance advisors.

Cheers,
Jacob Barclay