On January 3, 2012, the U.S. Congress passed the National Defense Authorization Act for Fiscal Year 2013 (“NDAA”). While the NDAA covers many issues relevant to the government contracting community at large, it also includes new, noteworthy amendments to the Small Business Act. The 2013 NDAA provides some significant changes to small business government contracting. Most importantly, the rule governing limitations on subcontracting has been revised. The new rule implements two substantive changes. First, for services contracts, the new limitation is now based on the total amount paid to the small business, not the cost of the contract incurred for personnel. The revised rule has serious implications for small business prime contractors, as they will no longer be able to exclude the cost of materials, supplies, and other non-labor costs from their subcontracting limit calculations. Second, small business prime contractors may now meet their performance requirements by subcontracting to other “similarly situated” small businesses, i.e., those either small under the same standard or participating in the same small business program.