SBA Moves to Redraw Who Counts as a Small Business, and Two of Its Own Numbers Disagree

The Small Business Administration has proposed throwing out the table that decides whether a company is small enough to bid on federal contracts reserved for small business, and replacing it with a much shorter one.

The proposed rule, RIN 3245-AI67, was published in the Federal Register on 20 August 2026 at 91 FR 53741 and rewrites the size standards table in part 121 of title 13 of the Code of Federal Regulations. The table in force today sets 102 different levels across 978 industries and 18 sub-industry carve-outs, which the agency calls exceptions. The proposal sets 338 standards, 276 of them at the four-digit industry-group level and 62 at the five-digit level, and keeps no exceptions at all. Of the 338, 129 are measured in annual revenue and 208 in employee count. Four areas are excluded from coverage entirely: NAICS 4911, 5211, 8141 and all of sector 92.

Nothing has changed yet. This is a proposal, not a final rule. It carries no effective date, and the notice sets no target for finalising it. The current standards stay in force while the agency works through comments. The comment period closed on 21 September 2026, and no extension or reopening has been published.

Two official numbers, ten times apart

The rule states that 37,002 unique firms holding FY2025 federal contracts become newly eligible small businesses, and that those firms accounted for roughly 105,655 contracts in FY2025 worth more than $71 billion.

Four weeks later, on 17 September 2026, the agency's own Office of Advocacy put the figure at 4,000 to 6,000 current contractors gaining small business status, against approximately 56,000 firms already participating in the federal small-business contracting marketplace. It said it supports the economic analysis and concurs with the findings, and called the proposal "a narrow, targeted adjustment to eligibility, rather than a broad expansion of the small-business marketplace".

Both documents carry the same agency's name, and they were published within four weeks of each other. Neither explains the gap, and nothing published since has reconciled them. The rule counts firms holding at least one FY2025 contract action; the Advocacy release appears to be counting participants in the contracting marketplace. For an owner already bidding into a set-aside pool, the difference between 6,000 new competitors and 37,002 is the entire question, and the agency has not answered it.

The same Advocacy release also describes the proposal as covering "388 broader industry groups and industries". The rule itself and the agency's own news release both say 338. The 388 appears to be an error, and no correction has been issued.

What actually changes for a bidder

Three things decide whether a given company moves across the line.

The first is the measure. Wherever the agency has discretion, the proposal defaults to counting employees rather than revenue, reversing the 2024 methodology, which defaulted to receipts outside manufacturing and services. The stated reason is to cut the number of firms flipping between small and other-than-small on revenue volatility, inflation and productivity growth.

The second is the ceiling. Today no revenue-based standard can exceed $47 million and no employee-based standard can exceed 1,500 employees. The proposal removes both maximums outright. A minimum remains.

The third is direction of travel. The agency's own analysis produced a lower standard for 45 industry groups and industries, and the proposal keeps every one of them exactly where it is, publishing the table of them. Metal Ore Mining came out at 1,450 employees and the proposal keeps 1,500. Natural Gas Distribution came out at 500 and the proposal keeps 1,150. Gypsum Product Manufacturing came out at 700 and the proposal keeps 1,500.

"SBA therefore proposes not to reduce any industry size standard, even in the 45 industries where analytics may propose a decrease." - SBA, section C, Changes to Methodology, 91 FR 53743

Totalled up, the count of firms the government treats as small rises from 6,344,967 to 6,459,508, a net increase of 114,541, which the notice puts at 1.8 percent of employer firms. Fewer than 200 businesses lose small status, against about 114,236 gaining it, and once the no-reductions policy is applied the losses narrow to fewer than five firms, all of them in Direct Property and Casualty Insurance Carriers, NAICS 524126, where the standard changes from 1,500 employees to $842 million in receipts.

The thresholds the agency is willing to name

In its news release on the proposal, the agency named four industries where the number rises: semiconductor manufacturing from 1,250 to 2,800 employees, shipbuilding from 1,300 to 2,300, oil drilling from 1,000 to 2,650, and support activities for animal production from $11 million to $71 million in receipts.

Beyond those, per-industry figures are hard to get. The full table of 338 proposed standards is published in the Federal Register as scanned graphics rather than machine-readable text, so an owner who needs the number for a specific code has to read it off the PDF at govinfo.

The notice does say where the newly small are concentrated among firms that already hold contracts. Engineering Services, code 541330, accounts for 5,314 of them. Other Computer Related Services accounts for 2,247, Custom Computer Programming Services 2,171, Administrative Management and General Management Consulting 1,818, and Computer Systems Design Services 1,663. Professional services, in other words, absorbs most of the change.

For scale, the notice records that the federal government spent over $883 billion on contracts in FY2025, that the statutory small business prime contracting goal is no less than 23 percent, and that FY2024 produced a record $179 billion in prime contract dollars to small businesses. The Office of Management and Budget determined the rule is not a significant regulatory action, and the agency states it "will not impact the total number of federal contracts".

That is the part worth reading twice. A bigger pool bidding for the same work is not neutral for the firms already in it.

"Growing small businesses closer to the size standard are therefore likely to face the greatest competition from the newly eligible firms under the proposed rule." - SBA, Impact on Government Contracts, 91 FR 53775

What is still open

How many comments were filed is not public. The docket, SBA-2026-0199, refuses unauthenticated requests, so neither the count nor the identities of commenters could be read from a primary source.

When, or whether, a final rule arrives is not stated anywhere in the notice. Until one publishes, none of these thresholds bind anyone.

Whether the newly eligible firms will actually bid is unknown, and the agency says so. It also notes that self-reported revenue and employment data in the federal registration system is outdated or inaccurate, so more firms may be affected than the estimate captures. Nor does the notice say what happens to the 45 held-flat industries at the next five-year review, or whether removing the 1,500-employee ceiling produces any standard above the 2,800 it names for semiconductors.

This is the third five-year review required by the Small Business Jobs Act of 2010. In the second, the agency reviewed 1,037 size standards, increased 436, and declined to cut the 492 its analysis said could fall, citing the pandemic. The pattern this time is the same, applied to a table a third the length.