SBA Proposal Would Raise IT and Consulting Size Thresholds, Expanding Small Business Pool

Key points

• SBA proposes consolidating nearly 1,000 individual size standards into broader 4- and 5-digit NAICS groupings.
• The IT sector (NAICS 5415) would see its size standard rise from $34 million to $531 million in annual receipts.
• Consulting services (NAICS 5416) would see a new $295 million threshold, up from current limits ranging between $19 million and $29 million.
• The new methodology bases standards on market size, including national industry size, geographic markets, and import/export adjustments.
• SBA estimates the changes will newly classify approximately 110,000 to 114,500 firms as small, an increase of roughly 1.8% to 2%.
• Public comments on the proposed rule and methodology are due by September 21, 2026.

Background

This proposal follows the Biden Administration’s 2024 size standard methodology, which SBA now seeks to replace. Recent regulatory actions, such as the Pentagon’s pause on CMMC audits, have aimed to reduce burdens on small defense firms. Additionally, small businesses have recently challenged federal tariffs in court, highlighting ongoing tensions between regulatory frameworks and small business viability. The current proposal represents a significant shift in how SBA defines competitiveness and market dominance.

How outlets are covering it

Washington Technology emphasizes the methodological shift, noting that SBA is adopting a market-size approach similar to the Justice Department’s Horizontal Merger Guidelines, which includes geographic and import/export adjustments. OrangeSlices AI focuses on the specific impact on IT and consulting sectors, highlighting the dramatic increase in revenue thresholds and the potential for 37,000 new small business qualifiers. The Office of Advocacy provides a broader view, noting the consolidation of standards and the overall increase in the number of firms classified as small. While all sources agree on the expansion of the small business pool, Washington Technology highlights the shift to employee-based standards for some industries, whereas OrangeSlices AI focuses on the revenue-based changes in IT and consulting. The Office of Advocacy notes the potential for increased competition but frames it as a benefit for smaller firms competing against larger rivals.

Why it matters

The proposed changes could significantly alter the competitive landscape for federal IT and consulting contracts. By raising size thresholds, larger firms may retain small business status longer, potentially increasing competition for set-aside opportunities. This could impact smaller firms that currently benefit from these preferences, as they may face stronger competition from larger entities. The changes also reflect a broader shift in how SBA defines small business status, moving away from simple revenue or employee counts to a more complex market-based approach. This could have long-term implications for federal contracting, small business support programs, and the overall structure of the IT and consulting industries.

What to watch

SBA is accepting public comments on the proposed rule and methodology until September 21, 2026. Following the comment period, SBA will review feedback and potentially finalize the rule. If finalized, the new size standards will take effect, impacting federal contracting, SBA loan programs, and other small business benefits. The changes could also lead to further adjustments in how SBA monitors and enforces small business status, potentially requiring firms to reassess their eligibility for set-aside contracts and other preferences.