SBA’s size standard rewrite draws angry, frustrated comments

In the first week after its Aug. 20 release, the Small Business Administration’s proposed size standards have received hundreds of comments, and there are still three weeks to go.

SBA’s proposal for the new size standards is garnering a lot of negative comments on Regulation.gov, with the latest count showing 325 filed comments. A second rule that explains the methodology for how SBA will calculate the size standard has received 109 comments.

Comments for both rules are due by Sept. 21.

The changes to the size standard are sweeping, expanding the scope of how a small business will be defined. By SBA’s calculations, another 115,000 firms will qualify as small.

Many of the filed comments reflected what people have been saying on LinkedIn—the expansion will punish the small businesses currently carrying that designation.

Businesses with less than $50 million in annual revenue will theoretically be competing with businesses with hundreds of millions in revenue or even a billion in some categories because those companies will be considered small.

“While we support periodic updates that account for inflation, market changes, and the realities of business growth, this proposal appears to go well beyond modernization,” one commenter wrote. “The rule risks redefining “small business” into what is effectively a mid-size business category.”

I did find some supporters as I randomly read the comments posted on Regulation.gov. “The current limits on small business especially certain NAICS codes are harmful to both growing small businesses and the federal government,” wrote one supporter.

But the supportive comments were outnumbered by commenters expressing fear for the businesses as well as frustration with what they see as the unfairness of the SBA proposal.

“The proposed rule would blur the line between small businesses that rely on set-asides to enter and grow in the federal market and much larger firms that already have substantial revenue, staff, proposal infrastructure, incumbent relationships, and pricing flexibility,” wrote the CEO of one woman-owned small business.

That last part of her comment seems to be what is sticking in the craw of many of the commenters opposing the changes. When a traditional small business with $30 million in annual revenue must compete with a “new” small business with $300 million in revenue, the differences are more than just the amount of annual revenue.

As some of the commenters argued: The kind of infrastructure needed to build a $300 million companies simply doesn’t exist at a $30 million company. You’ll see differences in bid and proposal operations, capture, past performance, accounting systems, and on and on.

“The practical consequence is not an expansion of opportunity, but a de facto conversion of the small-business program into a marketplace increasingly dominated by the largest firms still classified as small,” one commenter wrote. “Calling these firms ‘small’ does not make them similarly situated competitors.”

This commenter went on to say: “The success of this rule should not be measured by how many additional firms qualify as small. It should be measured by whether contracting opportunities remain meaningfully accessible to truly small, independent businesses.”

More than a few comments expressed anger at SBA’s proposal. “You basically will be removing my value to a larger company. This is disgusting,” one wrote.

Because SBA only gave a 30-day window for comments, there is concern that the size standard changes are a done deal. The prevailing wisdom is that the shorter the comment period, the less likely an agency is to change its proposal.

SBA is required to respond to comments that it considers “significant” but there is no uniform definition what is significant. SBA also opens itself to litigation if it doesn’t address significant comments.

The only other public response we may see will come in the preamble of the final rule.

For now, we’ll continue tracking the comments. Keep them coming.

I recently participated in a panel discussion about the proposed size standards led by Guy Timberlake of the American Small Business Coalition. It’s a group of people much smarter than me. Click to watch.