On August 20, 2026, the SBA proposed the biggest rewrite of federal small business size standards in decades. If the rule is finalized, many companies that are “large” today would count as small, and they could compete for the same set-aside contracts you do.
The comment period was originally set to close September 21. SBA has now extended it to November 20, 2026, so there is still time to understand the proposal and weigh in.
What SBA is proposing
There are two proposed rules. One changes the method SBA uses to set size standards. The other applies that method to every industry. The main changes:
- Far fewer categories. Today there are close to 1,000 industry-specific size standards tied to six-digit NAICS codes. SBA proposes cutting that to 338, set mostly at the four-digit NAICS level.
- Higher thresholds. SBA would add inflation and productivity growth to receipts-based standards and remove explicit maximums. It says no existing standard would go down.
- Some dramatic jumps. Reported examples include computer systems design (541512) rising from $34 million to about $531 million, and engineering services (541330) rising from $25.5 million to about $252 million.
- More employee-based standards. Many industries that are measured by revenue today would be measured by number of employees instead.
- No more exceptions. The 18 special sub-industry exceptions used in federal contracting would be removed.
How many companies would be affected?
SBA’s first estimate was that about 114,000 more businesses would qualify as small, including roughly 37,000 firms that already held federal contracts in fiscal year 2025. In September, SBA reopened the comment period and sharply lowered that estimate to about 4,000 to 6,000 newly qualifying firms.
Either way, the effect is concentrated. In industries where thresholds jump the most, like IT and engineering, you could see much bigger competitors on small business set-asides.
What it means for your business
If you are already a small business
You are very unlikely to lose your status. The bigger concern is competition. A firm with ten times your revenue, a full proposal team and better pricing power could start bidding on the set-asides you rely on. Your advantages become speed, relationships and certifications that size alone cannot buy, such as WOSB, HUBZone, SDVOSB and 8(a).
If you are mid-sized and “too big” today
This could reopen the small business market for you. Watch the final rule for your NAICS code, and make sure your SAM.gov registration lists the right codes before the rule takes effect.
If you work mainly with California agencies
This proposal changes federal SBA size standards. California’s own Small Business certification, run by DGS, uses its own limits: 100 employees or fewer and average gross receipts of about $19 million, as we explain in our California SB eligibility guide. The federal change does not rewrite those state rules. Many of our clients hold both kinds of status, so it is worth reviewing each one separately.
What to do now
- Look up your NAICS codes in the proposed table and compare your current and proposed standard.
- Estimate who moves into your lane. Look at the competitors who just miss today’s threshold. They are the firms most likely to show up on your next set-aside.
- Submit a comment by November 20. Comments go through regulations.gov under docket SBA-2026-0199 (size standards) and SBA-2026-0265 (methodology). Specific numbers from your own business carry more weight than general objections.
- Strengthen what size cannot replace. Add a socio-economic certification if you qualify, and tighten your capability statement and past performance.
- Keep SAM.gov current. Your size status is calculated from your SAM.gov profile, so keep your NAICS codes, receipts and employee counts up to date.
This is a proposed rule. The final numbers may change after SBA reviews the comments, so treat any figures here as a snapshot of the proposal, not the final rule.
Frequently asked questions
When would the new size standards take effect?
Not yet. They are proposed. SBA must review the comments, which are due November 20, 2026, and then publish a final rule with an effective date.
Could my business lose small business status?
SBA says it is not lowering any size standard, and it estimates fewer than 200 firms would lose status. The larger risk for most small businesses is more competition.
Does this change California Small Business certification?
No. California DGS certification has its own employee and gross receipts limits. The SBA proposal applies to federal size standards.
How do I submit a comment?
Go to regulations.gov and search docket SBA-2026-0199 for the size standards rule, or SBA-2026-0265 for the methodology rule.
Work with GERC
We help small businesses check their size status, update SAM.gov and add the certifications that protect them from bigger competitors. GERC is a woman-owned firm in San Bernardino, registered in SAM.gov under CAGE code 11SD2 and certified by the State of California as a Small Business (Micro) and a Small Business for Public Works (SB-PW). Book a consultation or see our federal contracting services.