Size Standards Proposed Regulations Blow the Roof off of the Small in Small Business Administration
In several industries, a firm sitting at SBA’s proposed size standard would account for more than 40 percent of the entire industry’s receipts. In some, the implied share exceeds 100 percent — the proposed standard for a small business is larger than the whole industry.
That is not modernization. That is redefinition, and it is being done by regulation.
What SBA proposed
On August 20, 2026, SBA published two interrelated notices: a Revised Size Standards Methodology (91 FR 54096) and a proposed rule setting new standards for 338 industry groups built on that methodology (91 FR 53741).
Together they would replace nearly 1,000 principally six-digit NAICS standards with 338 standards set largely at the four- and five-digit level, eliminate every existing size-standard exception, convert numerous industries from receipts-based to employee-based measures, and remove the existing maximum. For industries receiving increases, receipts-based standards would rise by an average of roughly 950 percent and employee-based standards by about 175 percent. Receipts-based standards today run from $2.25 million to $47 million and average about $24 million; under the proposal they would run from roughly $31 million to more than $1 billion and average about $246 million.
SBA also proposes not to reduce standards in the 45 industries where its own methodology produces decreases.
The statutory problem
Section 3(a) of the Small Business Act requires that a qualifying small business concern be “not dominant in its field of operation.” SBA has historically tested dominance by comparing a firm at the size standard against total industry receipts, treating shares above roughly 40 percent as an indicator requiring further scrutiny. The NPRM does not systematically apply that test to the standards it proposes. That is how a rulemaking arrives at implied shares above 100 percent.
The methodology underneath has its own difficulties. It replaces industry-specific analysis grounded in observable characteristics — average firm size, industry concentration, startup costs and entry barriers, firm-size distribution, Federal procurement characteristics — with modeled average geographic market size, which is neither directly observable nor empirically validated. It adopts an antitrust reading of “field of operation” that is inconsistent with SBA’s own historical implementation of the Act. It adjusts receipts-based standards for productivity growth but not employee-based ones. It builds in trade adjustments that penalize export-oriented industries.
SBA is building by regulation what Congress did not.
Who this actually affects
SBA estimates that roughly 114,500 currently other-than-small firms would newly qualify as small, including more than 37,000 already competing in the Federal marketplace and associated with over $70 billion in Federal contract awards.
Measured against FY 2025 results, that group is nearly 65 percent of the existing small business vendor count, and their awards exceed 40 percent of total small business contract dollars.
These firms have succeeded while competing as other-than-small businesses. The NPRM does not adequately explain why they need to be reclassified as small in order to compete.
Comment by September 21, 2026
Comments close September 21, 2026 — a 30-day window on the largest change to size standards in decades. Two dockets are open, and detailed comments have already been filed and publicly posted in both. They are worth reading before you write your own.
SBA-2026-0199 — the proposed size standards
SBA-2026-0265 — the revised methodology
Both are open to anyone. You do not need counsel to file, and you do not need to address the whole rulemaking — a comment on the single industry you work in is worth more than a general objection to all 338.
If you file, be specific. Name your NAICS code. Give your revenue or employee count against both the current and the proposed standard. State concretely what happens to your capture pipeline when firms ten or twenty times your size become your competition for the same set-asides. Generalized objection is easy to discount. A documented competitive effect in a named industry is not.