Small Business Size Standards

The Small Business Act defines a small business as a concern that is organized for profit; has a place of business in the U.S.; operates primarily within the U.S. or makes a significant contribution to the U.S. economy through payment of taxes or use of American products, materials or labor; is independently owned and operated; and is not dominant in its field on a national basis. The business may be a sole proprietorship, partnership, corporation, or any other legal form. In determining what constitutes a small business, the definition will vary to reflect industry differences.

Small Business Size Regulations specifying size standards and governing their use are set forth in Title 13, Code of Federal Regulations, part 121 (13 CFR §121). SBA's size regulations pertaining to Federal procurement are also found in the Federal Acquisition Regulation, 48 CFR part 19. 

The Electronic Code of Federal Regulations (eCFR) is maintained by the U.S. National Archives and Records Administration. It includes all changes to the Small Business Size Regulations, which are current as of the date specified at the top of the linked page.

Information about any recent actions SBA has taken or has proposed to take regarding its size standards are listed in What's New.

Table of Size Standards
SBA has established a Table of Small Business Size Standards, which is matched to the North American Industry Classification System (NAICS) industries. A size standard, which is usually stated in number of employees or average annual receipts, represents the largest size that a business (including its subsidiaries and affiliates) may be to remain classified as a small business for SBA and Federal contracting programs. If a business exceeds the size standard for its overall industry group, it may still be a small business for its specific industry within that group; some industries have higher size standards than the general one for the industry group.

Size Protests, Size Determinations, and Appeals

• The Office of Government Contracting makes formal size determinations on whether a business qualifies as an eligible small business for SBA programs.
• For questions about size protests and size determinations, contact an SBA Size Specialist listed at SBA Assistance.
• The Office of Hearings and Appeals (OHA) reviews appeals of formal size determinations.

Revision of Size Standards
SBA's Office of Size Standards develops and recommends small business size standards to the Administrator of SBA. These include recommendations on small business definitions that other Federal agencies propose. Federal agencies must obtain the approval of the SBA Administrator before adopting a size standard different from SBA's size standard.

Requests to change existing size standards or establish new ones are handled by the Office of Size Standards, which reviews industry and other relevant information and makes recommendations to the Administrator. Important factors include the structure of the industry and the effect of the size standard on Federal procurement. Changes to size standards must follow the rulemaking procedures of the Administrative Procedure Act. A proposed rule changing a size standard is first published in the Federal Register, allowing for public comment. It must include documentation establishing that a significant problem exists that requires a revision of the size standard, plus an economic analysis of the change. Comments from the public, plus any other new information, are reviewed and evaluated before a final rule is promulgated establishing a new size standard.

For further information, contact:

         Office of Size Standards 
         U.S. Small Business Administration
         409 3rd St., SW 
         Washington, DC 20416
         Phone: (202) 205-6618
         Fax: (202) 205-6390
         E-mail: sizestandards@sba.gov

Use of Size Standards for Government Procurement
For Federal contracts, the contracting officer designates the size standard of the procurement by selecting the size standard for the NAICS industry that best describes the goods or services being procured. When more than one NAICS is involved in a contract, consideration is given to the function of the goods and services being purchased and the relative value and importance of each.

To bid on a Federal contract, a concern must self-certify that it is a small business under the appropriate size standard in the solicitation. The size of the concern at the time of self-certification prevails for that contract. In the 8(a) and HUBZone programs, the concern must meet the size standard for its primary industry to be admitted to the program. Then it must meet the size standard for the NAICS industry assigned to each individual contract. 

If a procurement calls for two or more items with different size standards and the offeror must bid on all end items, it may qualify as a small business if it meets the common size standard for those items accounting for the greatest percentage of total contract value. If the offeror is not required to bid on all items, it may bid only on items for which it meets the size standard. To be awarded a government small business set-aside or 8(a) contract, the concern must perform at least a given percentage of the contract. This provision limits the amount of subcontracting a concern may enter into with other firms when performing these types of contracts. The provisions are as follows:

• Construction: For general and heavy construction, at least 15 percent of the cost of the contract, not including the cost of materials, must be performed by the prime contractor with its own employees. For special trade construction, such as plumbing, electrical or tile work, this requirement is 25 percent.
• Manufacturing: At least 50 percent of the cost of manufacturing, not including the cost of materials, must be done by the prime contractor.
• Services: At least 50 percent of the contract cost for personnel must be performed by the prime contractor’s own employees.

For more information, see Prime Contractor Performance Requirements (13 CFR §125.6).