A long-awaited moment for small-business service contractors across the U.S. has finally arrived. After nearly a year of uncertainty, the Small Business Administration (SBA) has finalized a rule to implement the Small Business Runway Extension Act, which was originally passed in 2018. Effective January 6th, receipts-based size calculations will change from a 3-year to 5-year measurement period. To ease implementation, SBA has also decided to adopt an interim 2-year transition period to allow companies to select using either the current 3-year calculation or the new 5-year calculation. However, after 2022, all companies will be required to use the 5-year measurement period for receipts-based size calculations.
This ruling is already rippling around the beltway and across the government services market. Red Team believes it will have wide-reaching tactical and strategic impacts starting in 2020. We have assembled a brief summary of considerations and key takeaways for our industry community.
4 Key Takeaways from the New SBA Ruling
1. Be aware that proposals submitted prior to January 6th most likely will still be held to a 3-year calculation, even though the 5-year calculation was enacted as federal law in December 2018. In fact, two protests were denied in August 2019, with GAO deferring to SBA’s interpretation of the Act not taking effect until the final rule-making was effective.
2. While this ruling allows small firms additional time to grow their competitive position, it also may have negative impacts for large firms with declining revenue taking longer to become small and “smaller-small” firms due to their larger direct small-business competitors being considered small over a longer time period.
3. With the adoption of a 2-year transition period, SBA is addressing concerns for firms that are small under a 3-year calculation, but other-than-small under a 5-year calculation. It also resolves a potential conflict with draft language in the FY 2020 National Defense Authorization Act (NDAA) indicating a transition period requirement for small business entities.
4. Finally, this serves as a reminder that even with statutory changes enacted as Federal law, it is always prudent to understand the downstream regulatory processes and agency interpretations from such changes. In this case, although Congress passed the Small Business Runway Extension Act, SBA was not compelled to adopt it until their own rule-making process was completed.
Overall, we’re seeing that the final SBA ruling is allowing many of our fast growing small-business clients to breathe a bit easier over the holidays. This ruling is a potential game changer for many firms looking to effectively compete for critical small business set-aside procurements targeted for release in the FY 2020/ FY 2021 planning horizon.
Need help with your growth strategy and account development to maximize these developments? Red Team Consulting can help! Contact us today.