Effective January 6, 2020, SBA will change the period of measurement for receipts-based size calculations from three years to five years. This change is the result of the Small Business Runway Extension Act of 2018 and SBA’s final rulemaking on December 5, 2019. This is a long-awaited change and will have far-reaching impacts for government contractors.
Importantly, SBA is adopting a two-year transition period, until January 6, 2022, during which firms may choose to use either the current three-year calculation or the new five-year calculation. After January 6, 2022, all companies must use the five-year period of measurement in determining their size under a receipts-based calculation. PilieroMazza strongly advocated for a transition period before Congress and in its comments to SBA’s rulemaking.
This shift from using a three-year period to a five-year period for the average annual receipts calculation will affect all of SBA’s receipts-based size standards, though the change in calculation will not yet apply to the SBA Business Loan and Disaster Loan Programs, which will be handled in a separate rulemaking. SBA did not address in its rulemaking how SBA would view contractors that have been using the five-year period of measurement since the Runway Extension Act became law nearly a year ago.
The co-authors of this Client Alert, Firm Partner Megan Connor and Associate Anna Wright, are members of PilieroMazza’s Government Contracts and Small Business Programs & Advisory Services practice groups.