Comments on SBA Proposed Rule “Small Business Size Standards” & Methodology

September 18, 2026

U.S. Small Business Administration

Office of Government Contracting and Business Development

409 Third Street SW

Washington, DC 20416

Submitted electronically via regulations.gov

Re: Comments on Size Standards Methodology (Docket No. SBA-2026-0265)

To the Administrator:

sbLiftOff (www.sbliftoff.com) appreciates the opportunity to comment on the Small Business Administration’s proposed size standards methodology. sbLiftOff is a mergers and acquisitions advisory firm that works with founder-owned government contracting businesses preparing for or executing a sale. We submit these comments separately from our comments on the specific proposed size standards in Docket No. SBA-2026-0199, because we believe the methodology itself, not only the resulting numbers, warrants reconsideration. As of mid-September, this docket had received only about 109 public comments compared with more than 300 on the standards docket, even though the methodology is what drives the standards. We think the size standards methodology is of great importance in this matter and deserves careful consideration.

1. There is a real problem, and a methodology fix could address it

Only in government contracting does a company’s valuation metrics decline as the business grows and approaches its NAICS code size standard. This unfortunate anomaly is what business owners and advisors in government contracting call the valley of death, the existential cliff, the mid-tier cliff, or the size-out cliff. As a federal contracting company nears its size standards threshold, the risk of having to compete in the full and open market once it crosses that size-out cliff grows. In fact, most companies that attempt the jump to full and open fail. A recalibrated methodology that pushes that cliff further out, so companies have more room to grow before facing that existential risk, would address a genuine and well-documented problem. We support that goal. Our concern is not that SBA is increasing size standards, it is how far, and on what basis.

1. The right test is whether this methodology advances the purposes the size standards were created to serve

Congress did not create the small business program, and agencies do not offer set work aside, in order to distinguish dominant companies from every other firm. The purposes are to promote small business growth and we think that is the appropriate goal when creating a new methodology. Measured against that all-American goal, this methodology does not hold up.

Preserving competition and limiting the concentration of economic resources. Congress expressly declared that federal policy should foster small business growth, reduce the concentration of economic resources, and expand competition. There is a practical procurement reason behind that. Left alone, federal contracting favors incumbents: firms with past performance, sophisticated capture and proposal organizations, security infrastructure, contract vehicles, compliance systems, and enough capital to absorb long procurement cycles. Those advantages compound. Set-aside contracts deliberately wall off a portion of the market so that smaller firms can compete against one another rather than against a $10 billion or $50 billion contractor.

Maintaining a broad and resilient federal supplier base. FAR policy requires agencies to provide the maximum practicable opportunity for small businesses to participate as primes and subcontractors. The reason is resilience: more viable suppliers, more sources of specialized expertise, less dependence on any individual prime, and more room for innovation. That matters acutely in government contracting, where a company can develop uniquely valuable capabilities in cyber, artificial intelligence, missile defense, intelligence, space, or engineering well before it has the scale to compete for unrestricted work. By SBA’s own estimate, roughly 37,000 firms that already hold federal contracts would become newly eligible for small business status. Those firms do not add capability to the supplier base, because they are already in it. What changes is that the genuinely small firms now compete against these giants for set-aside work.

Providing an on-ramp into federal contracting. Set-asides are meant to work as an on-ramp into federal government contracting. A company wins smaller set-aside work, builds past performance, systems, and people, wins larger work, and becomes capable of competing in the unrestricted market. Congress’s goal was not that a small company should stay small forever. Growth is one measure that the on-ramp into federal contracting is working, which is why we take the size-out cliff seriously and support moving it further out. But an on-ramp only functions if the vehicles on it are traveling at comparable speeds. Raising a threshold by a factor of ten does not lengthen the on-ramp for a $15 million company. It puts a $300 million company on the ramp beside it, competing for the same awards, with capture infrastructure and a wealth of other corporate resources the smaller firm cannot match. The companies most likely to be pushed off the ramp are the ones the ramp was built for.

III. The proposed methodology treats “not dominant” as the same thing as “small.” It is not.

The proposed rule would replace SBA’s existing seven-factor analysis with a three-factor model based on national industry size, number of geographic markets, and a net imports adjustment. In practice, that model does not calibrate a size standard to the companies actually competing in an industry. It sets the threshold high enough that nearly any company short of an outright dominant market leader qualifies as small. Dominance may be a reasonable test for what makes a business large, but it is not a definition of small. There are companies that could accurately be described as neither dominant nor genuinely small. A methodology built around excluding only dominant companies places every business in that middle range, however large they are, under the moniker of “small.” A company that is merely not dominant in its industry is still not what most people, or even competitor businesses seeking the same work, would recognize as a “small business.”

The results bear this out. Across the core government contracting services industries, the increases run roughly ten to fifteen times the current standard: custom computer programming services (NAICS 541511) from $34 million to $531 million, engineering services (NAICS 541330) from $25.5 million to $252 million, management consulting (NAICS 541611) from $24.5 million to $295 million, and architectural services (NAICS 541310) from $12.5 million to $135 million. A methodology that produces order-of-magnitude increases across almost every industry does not read as a considered recalibration of where dominance begins. It reads as a formula built to maximize how many companies could qualify as small, regardless of the reality of their size and resources.

1. The purpose of a size standard is to let similarly situated companies compete. This methodology appears to result in a very different purpose, one never envisioned by Congress.

SBA’s size standards exist so that companies in a genuinely similar competitive position compete against each other for the same set-aside awards. A $15 million company and a $100 million company, let alone a $300 million or $500 million company, are not in a fair fight for the same contract. They differ in staffing depth, financing capacity, past performance, and proposal and capture infrastructure in ways that decide who wins. If what SBA is trying to do is have similarly situated entities compete against each other, a methodology calibrated only to exclude the dominant firm overshoots that mark, because it groups together companies that are not remotely similarly situated, so long as they are not dominant in their industry.

Historically, adjustments to these standards have been incremental and tied to inflation. The standard for custom computer programming services has moved from the low twenty millions two decades ago to $34 million today. A jump to $531 million in the same code is not a continuation of that pattern. It is less reform than revolution, and it does not serve the goal of matching similarly situated competitors against each other, nor of nurturing the defense industrial base by giving small businesses the support to start, grow, and offer innovation. We do not object to size standards rising. We object to their rising to levels that bear no relationship to the goals of Congress and the American people who value and promote small businesses across America.

1. Recommendations
2. Withdraw the three-factor methodology and retain an industry-calibrated approach. Our primary recommendation is that SBA withdraw the proposed three-factor methodology and retain an approach calibrated to the companies actually competing within an industry. If SBA revises the methodology rather than withdrawing it, we ask that the revised approach be calibrated to the real competitive distance between companies within an industry, not solely to whether a company is dominant, and that it target an increase closer to two to three times current standards. That is enough to move the size-out cliff meaningfully further out without treating every non-dominant company as small regardless of its size and scope.
3. In the alternative, keep the methodology and restore a maximum size standard. If SBA is committed to the three-factor model, there is a simpler fix that preserves the methodology and still prevents the outcome described above: apply a single revenue ceiling across all small business NAICS codes, above which a company is not a small business regardless of what the formula produces.

This is not a novel mechanism. SBA’s current framework already caps calculated receipts-based standards at $47 million and employee-based standards at 1,500 employees. The proposal would eliminate that ceiling while retaining a floor of $30.6 million in receipts or 500 employees, so that firms that are small in absolute size keep access to SBA programs. Absolute size, in other words, already matters to SBA at the bottom of the range. The same logic applies at the top. It is the removal of the ceiling, more than the three factors themselves, that produces standards of a quarter billion dollars and more.

There is a defensible basis for where to set that ceiling, and it rests on what a company can actually do rather than on industry receipts. Somewhere in the range of $80 million in annual revenue, a government contractor can afford the things full and open competition requires: a real capture and proposal organization, business development investment ahead of revenue, a bid and proposal budget, an indirect rate structure that can carry those costs, recruiting capacity, and a balance sheet that can absorb a significant loss and keep going. A company at that size that has not built those capabilities has made a choice. A company at $35 million has not made a choice, because it does not have the same options. The same investment would consume the margin it needs to survive. That distinction, between what a company can choose and what it cannot, is a more honest line between small and not small than whether a firm is dominant in its industry.

We offer $80 million as a reasonable starting point rather than a precise finding, and we would encourage SBA to test the level against the cost structures a firm must carry to compete unrestricted, rather than against industry-wide receipts. A ceiling of this kind would also let SBA keep the parts of the proposal that have merit. Consolidating to four- and five-digit NAICS codes, simplifying the factor model, and adjusting for productivity could all stand. The formula would set the standard wherever it lands below the ceiling, and companies above the ceiling would be what they are, which is not small.

We would welcome the opportunity to provide additional input on this methodology if useful to SBA’s deliberations.

Respectfully submitted,

sbLiftOff

11490 Commerce Park Drive, 5th Floor

Reston, VA 20191