SBA Size Standards Will Be Employment-Based The Small Business Administration is drafting regulations that would base all size standards on the number of employees rather than revenues, said Gary Jackson, assistant administrator for size standards. The Defense Department proposed changing to employment-based standards last spring. (SAA, 5/2) Frank Ramos, director of DOD’s Office of Small and Disadvantaged Business Utilization, said the large dollar value of most defense contracts means that small firms can outgrow their size standard if they win just one award. Under current regulations, size standards in most non-manufacturing industries are based on gross receipts; standards are based on the number of employees for wholesalers (maximum of 100 employees) and most manufacturing and mining industries (500 employees). “For industries that currently use annual receipts…we would convert that to an equivalent employee level,” Jackson said in an interview. He said he does not anticipate requiring extensive industry studies to make the switch. However, any change in size standards usually draws intense interest from the affected industries. Jackson declined to estimate when the proposed rule might be issued, but said it is on a fast track. The change is part of an overhaul of size standards that SBA announced last year. An interagency working group including DOD and the Office of Management and Budget has been considering the issues. But SBA officials have repeatedly emphasized that they do not plan to increase size standards, as many small business advocates want. The current standards were set in 1994. The dollar-based standards were raised by 15.8% last year to keep up with inflation. “Our objective is to simplify them and make them easier to use,” Jackson said. There are now 32 different standards. Fred Armendariz, SBA’s associate deputy administrator for government contracting and business development, once described the patchwork of standards as “a cumbersome, convoluted mess.” Armendariz has also said the agency is reviewing net-worth standards. Currently a business owner can qualify for 8(a) or small disadvantaged business certification only if his or her net worth is $250,000 or less, not counting equity in the business or a home. The House Small Business Committee has proposed tripling the net-worth limit to $750,000. That provision is in the SBA reauthorization bill, H.R. 2802, which is awaiting floor action.