On Friday, August 22, 2025, the Small Business Administration (“SBA”) released a proposed rule to increase the size standard for what it considers to be a small business across 263 industries. The proposed rule principally covers receipts-based size standards. These proposed increases stem from SBA’s periodic review of size standards to ensure the standards reflect current industry and market standards. SBA announced that this is one of two proposed rules related to changes to small business size standards, with this proposed rule addressing monetary-based size standards (i.e., annual receipts) and the next addressing employee-based size standards.
Proposed Changes to Size Standards
Sectors with the most proposed increased size standards include Retail Trade (32 of 55 industry size standards), Professional, Scientific, and Technical Services (31 of 48), and Health Care and Social Assistance (29 of 39). Notable industry-specific size standard increases include Telecommunications (NAICS 517810) from $40 to $45.5 million in average annual receipts, Engineering Services (NAICS 541330) from $25.5 to $29 million, and Administrative Management and General Management Consulting Services (NAICS 541611) from $24.5 to $27 million.
Notably, in addition to raising hundreds of size standards, SBA also proposed retaining 237 size standards, including many for commercial construction and military and aerospace equipment, that SBA believes could be reduced based on its methodology for assessing appropriate small business size standards. In support of retaining these standards, SBA noted the ongoing economic impacts resulting from the COVID-19 pandemic, as well as its general policy of not lowering size standards unless attempting to exclude dominant firms from qualifying as small.
SBA’s proposed increase and retention of size standards would allow more businesses qualifying as small to compete for Federal contracts. Additionally, the proposed increases would allow growing small businesses close to exceeding the current standards to retain their small business status for longer, allowing them to continue to benefit from the small business programs.
SBA Size Standard Reviews
In accordance with the Small Business Jobs Act of 2010, SBA reviews small business size standards every five years to determine whether the existing standards reflect the current industry structure and Federal market conditions. SBA revised its methodology for establishing, reviewing or modifying size standards in September 2024, and the size standard changes contemplated in this proposed rule are the first to incorporate the revised methodology.
As part of its review, SBA considers the following primary factors: (1) average firm size, (2) startup costs and entry barriers, (3) industry competition, (4) distribution of firms by size, and (5) small business success in receiving Federal contracting assistance. Under the revised methodology, SBA computes a disparity ratio, i.e., the ratio between the small business share of Federal contract obligations and the small business share of industry receipts. SBA uses the disparity ratio to determine when to increase the relevant size standard for a given industry. SBA assumes that small businesses are underrepresented in Federal contracting if an industry’s disparity ratio is less than 0.8, and would increase the size standard in that industry.
SBA is seeking public comment on its proposed changes to size standards, the data sources it evaluated to develop the proposed size standards, and its proposed policy of not lowering any size standards, except for excluding dominant firms from qualifying as small. Comments should be submitted on or before October 21, 2025, and will be made available for public review on Regulations.gov.