Small Business Administration Threshold Update

February 14, 2019

On December 19, 2018, we posted a blog regarding the Small Business Runway Extension Act of 2018 and the impact on the revenue test established by 13 CFR §121.104. As a refresher, the Small Business Runway Extension Act amended the method to calculate the average annual gross receipts from three years to a five-year average when determining a contractor’s small business status.

Subsequently, on December 20, 2018, the Small Business Administration (“SBA”) offered some clarifying guidance on the effective date of the new amendment to section 3(a)(2)(C)(ii)(II) of the Small Business Act, based on inquiries if the Small Business Runway Extension Act is effective immediately. Based on the guidance, the amendment of three to five years still has to go through the rulemaking process. As a result, the five-year average is not yet effective. To quote, “The change made by the Runway Extension Act is not presently effective and is therefore not applicable to present contracts, offers, or bids until implemented through the standard rulemaking process.”

So what does this mean for current small businesses? For now, small business contractors should continue to operate and assess their revenue threshold using the three-year standard and hope that the Office of Government Contracting and Business Development quickly drafts the revisions to the SBA’s regulations.

We will continue to provide information on implementation of the new timeframe. Please check back for further updates. In the meantime, contact a member of Cherry Bekaert’s Government Contracting Services Group for assistance.