December 18, 2018

New Law Makes Small Business Size Status Look-Back Five Years

Holland & Knight Government Contracts Blog
Elizabeth N. Jochum

President Trump signed a bill into law that changes the look-back period for determining small businesses' size status from three years to five. The change means that the size of a contractor will be measured by averaging the last five completed fiscal years of revenue or employee count for purposes of determining eligibility for small business status, rather than three years as the law previously prescribed. The change will allow companies on the verge of outgrowing their North American Industry Classification System (NAICS) codes to remain small for longer and receive the benefit of set-aside contract awards.

One of Congress's more succinct bills, the Small Business Runway Extension Act of 2018 states simply:

Section 3(a)(2)(C)(ii)(II) of the Small Business Act (15 U.S.C. 632(a)(2)(C)(ii)(II)) is amended by striking "3 years" and inserting "5 years."

Because the law directly amends the Small Business Act without explicitly requiring implementation, the law should be effective immediately or by the first of the new year. We will have to wait, however, to see if the Small Business Administration agrees with this interpretation or whether it will take the position that the change is not effective until it issues a final rule changing Title 13 of the Code of Federal Regulations. If the Small Business Administration takes the position that regulations need to be written, implementation of the change may have to wait until 2019—or even 2020.

Holland & Knight's Government Contracts team will post further updates when we know more about the effective date for the change.

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