On August 20, 2026, the U.S. Small Business Administration published a proposed rule that would reshape how it defines a "small business" across nearly every industry. For many firms the proposal expands access to federal contracts and SBA loan programs; for existing small businesses built around set-aside work, the prospect of roughly 114,500 additional firms entering the small business pool means more competitors bidding for the same contracts. Comments are due September 21, 2026.
Size standards are the thresholds — measured in annual revenue or employee count — that determine whether a business qualifies as "small" for federal purposes, including SBA-guaranteed loans and set-aside contracts. The SBA currently maintains nearly 1,000 standards tied to six-digit industry codes (NAICS codes); the proposal would consolidate them into 338 broader categories at the four- and five-digit level and, for most industries, raise the thresholds.
Key Proposed Changes
The biggest changes is that the size thresholds would increase in the vast majority of industries — including engineering services, information technology, construction, food manufacturing, and telecommunications.
Another huge changes is that many industries that have historically been measured by average annual revenue would move to employee-based standards. This could be a more stable measure that reduces year-to-year swings in eligibility for those businesses that have up and down years.
For those industries keeping revenue-based standards, those standards would be adjusted for general productivity growth as well as inflation, for the first time.
Finally, the SBA proposes no reductions in any industry where the measurement basis stays the same — thresholds there will rise or hold steady, but will not fall.
Implications for Currently Classified Small Businesses
For firms that already hold small business status, the SBA estimates that fewer than 200 businesses nationwide (out of more than 6.3 million) could lose their designation; the only meaningful exception is direct property and casualty insurance carriers (NAICS 524126), where the metric shifts from 1,500 employees to $842 million in receipts, affecting fewer than five firms. The significant change is competitive: roughly 114,000 additional firms would qualify as small.
If You Are Worried About Increased Competition
In some industries, the composition of the small business pool will change materially. The SBA estimates that 37,002 firms holding FY 2025 federal contracts would newly qualify as small, concentrated in Engineering Services (5,314 firms), Other Computer Related Services (2,247), Custom Computer Programming Services (2,171), and management consulting (1,818). Firms in those markets may find themselves bidding against competitors with far greater staffing, bonding capacity, and past performance depth. The SBA claims that the impact will fall most heavily on firms nearest the current thresholds, since they compete for the same requirements as the new entrants, and it acknowledges that increased competition may reduce profits — treating lower pricing as a benefit to agencies and taxpayers, a dynamic that reads differently for an owner managing payroll and thin indirect rates.
However, the same higher thresholds also extend your own runway. Under current standards, growing firms hit what researchers cited in the rule call a “benefit cliff” — the point at which growth costs a firm its small business status and access to set-asides. I have often counseled clients whose businesses are nearing the threshold and are planning for the transition. The proposal pushes that cliff further out, and for some firms that headroom outweighs the incremental near-term competition.
Particular Significance for Women- and Minority-Owned Businesses
Participation in the WOSB, EDWOSB, 8(a) Business Development, and HUBZone programs requires that a firm first meet the applicable SBA size standard. Higher thresholds therefore allow more women- and minority-owned businesses to clear that foundational requirement and pursue certification — which in turn opens access to set-aside procurements and, in qualifying circumstances, sole-source awards made without competitive bidding, along with mentoring through the SBA Mentor-Protégé program.
Size eligibility is a necessary first step, not a sufficient one. Each program imposes further requirements — ownership and control thresholds, personal net worth limits, geographic criteria, or documentation of social and economic disadvantage — so meeting the size standard opens the door to certification without guaranteeing it.
Implications for DBE- and ACDBE-Certified Businesses
The NPRM does not specifically address the Department of Transportation's DBE or ACDBE programs, but both incorporate SBA size standards as a threshold eligibility criterion, so the changes flow directly into those frameworks. Under 49 CFR Part 26, a DBE applicant must qualify as a “small business concern” under the SBA standard for its NAICS code(s) and fall below the program’s statutory gross receipts cap — currently $32.82 million for FHWA- and FTA-assisted contracts. The ACDBE program under 49 CFR Part 23 applies the same dual-threshold structure to airport concessions, with a $56.42 million cap on average annual gross receipts over the preceding five fiscal years, calculated under 13 CFR 121.104. The statutory gross receipts cap will offer some insulation from bigger competitors going after DBE contracts.
State and local transportation agencies, transit authorities, and airport sponsors set DBE participation goals based on the availability of certified firms in their markets. A larger size-eligible pool may in time affect the availability analyses and goal-setting calculations under 49 CFR §§ 26.45 and 23.45, and may increase competition for DBE- and ACDBE-designated work. State Unified Certification Programs and airport sponsors will also need to update their systems for the new four- and five-digit classification structure.
Certified firms should determine how their certified NAICS code(s) would be reclassified and which standard would then apply; measure their size against both the proposed SBA standard and the applicable program cap, recognizing that growth within a higher SBA threshold can still breach the cap; prepare for recertification, since 49 CFR § 26.83(j) requires annual affidavits of no change with supporting size documentation; and comment on DOT certification effects, which the NPRM does not analyze.
How to Participate: Submitting a Public Comment
This is a proposed rule, and the SBA must consider public comments before adopting final standards. No legal or policy expertise is required. The agency benefits most from concrete detail: how current standards affect your operations and growth decisions, whether the proposal would help or hurt your firm, the obstacles you have faced in accessing SBA programs or competing for contracts, and any concerns about increased competition or loss of status.
Comments are due September 21, 2026. To comment electronically, visit this site or go to www.regulations.gov and search for Docket No. SBA-2026-0199 or RIN 3245–AI67; the notice is also available at https://www.federalregister.gov/documents/2026/08/20/2026-17042/small-business-size-standards. Comments may also be mailed to Ryan Lambert, Associate Administrator, Office of Government Contracting and Business Development, U.S. Small Business Administration, 409 Third Street SW, Mail Code 6530, Washington, DC 20416.
Have concerns about how this proposed change may affect your business? Please contact Danielle Dietrich, Esq. at ddietrich@potomaclaw.com or 412-449-9141.
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