More Firms Will Now Be Eligible for Government Small Business Contracts

More companies will be eligible to compete for federal contracts reserved for small businesses, due to the recent implementation of a 2018 law. 

On Monday, the Small Businesses Administration’s final rule to implement the 2018 Small Business Runway Extension Act took effect, increasing the period of measuring small businesses’ annual revenue from three to five years in the contract evaluation process. This is “going to increase the pool of eligible participants and make a lot more companies eligible to participate for small business set asides,” said Daniel Snyder, director of contract analysis at Bloomberg Government. 

The act was signed into law on Dec. 17, 2018. Snyder said there was a delay in implementation because there were “a small fraction” of companies put at a disadvantage by the change, so the agency wanted to figure out how to best mitigate any negative impact. The compromise was to “give small businesses the option to choose either three or five years and then there will be a phase-in period, so companies will be allowed to choose...whichever one puts them at a greater advantage until the phase-out period concludes.” The transition period ends on Jan. 6, 2022.

The rule change will benefit most small firms, procurement experts said. “Small businesses that are on the verge of exceeding their relevant industry small business size standard can extend their small business lifetimes and their access to small business set-aside procurements,” according to the law firm Arnold & Porter. “This extension will also give small businesses additional time to build up their internal structure before entering the highly competitive full and open marketplace.”

The consulting firm SC&H Group said the changes will be “profound” for small business contractors. “The intention of the Small Business Runway Act is to reduce the impact of unexpected and rapid growth a small business may experience,” said the group. “This rapid growth could potentially distort the company’s look-back revenue, causing it to prematurely lose its small business status and the incentive that status provides.”

In fiscal 2018, the federal government met its small business spending goals for the sixth year in a row and awarded a record-breaking $120 billion to small companies. Although “small businesses are at a disadvantage given their size,” said Snyder, “the government...does an effective job at structuring upcoming competitions in a way that does appeal to small businesses and level the playing field.”  

On Tuesday, the Senate confirmed Jovita Carranza as the head of the Small Business Administration. Carranza most recently was the U.S. Treasurer. She was also Trump campaign adviser and deputy SBA administrator during the George W. Bush administration.

Carranza said during her confirmation hearing on Dec. 11 that her goal “will be to expand access to SBA resources among entrepreneurs in disadvantaged communities, including African-American and Latino businesses, as well as businesses started by veterans. By better connecting these small businesses with SBA support services, we can help even more underrepresented entrepreneurs overcome barriers to financial capital and gain access to lucrative government contracts.”