Small Business Size Standards: Inflation Adjustment to Monetary Based Size Standards

On January 25, 2016, the Small Business Administration (“SBA”) finalized an interim rule which adjusts the monetary amounts used by small businesses to determine a company’s small business status. The interim final rule, which was originally issued on June 12, 2014, became effective on July 15, 2014, with the comment period ending August 11, 2014, and the final interim rule being established in December of 2014. The size standards are effective February 26, 2016. To summarize, the SBA increased all industry specific monetary small business size standards by 8.73 percent. Additionally, therule increased the alternate size standards for tangible net worth and net income for the Small Business Investment Company program. The highlights and conclusion from the comments periods are summarized below:

• The SBA will continue to use the gross domestic product (GDP) price index as the primary methodology to adjust for inflation, and is not adopting the use of a Consumer Price Index (CPI) or other indices.
• The SBA will continue to round to the nearest $500,000 to avoid having too many size standards.
• The SBA will continue to use a five-year review window for inflation to adjust the size standards. The SBA’s small business size standards apply to a wide variety of government programs; for these reasons, the SBA uses a broad measure of inflation for the entire U.S. economy to determine the most appropriate rate of inflation to adjust all of its monetary size standards.
• The SBA will provide additional clarification on size standards for Dredging & Cleanup Services, Architectural Services, and Waste Management & Remediation Services.

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