The U.S. Small Business Administration (SBA) announced in December 2013, that they would be revising size standards for companies in the North American Industry Classification System (NAICS) sectors. Standards for the Utilities (Sector 22) and Construction (Sector 23) sectors are being changed to reflect changes in the marketplace and public opinion. The new SBA size standards will become effective on January 22, 2014.

The 2010 Small Business Jobs Act mandates that the SBA must review all size standards for small business status at least every five years. The SBA makes the methodology used in reviewing and modifying standards available to the general public on its website. The latest standards set new guidelines for determining whether business entities in the Utilities and Construction sectors may be classified as small businesses.

The new SBA standards were developed to account for the structural characteristics of businesses in the Utilities and Construction industry sectors, such as the degree of competition, the average size of businesses and trends in federal contracting and procurement activities. It is anticipated that the new standards will provide for more companies to acquire or retain the small business status. The changes will provide federal agencies and procurement officers with a larger pool of small business candidates, and ensure that more businesses are eligible for small business loans.

Revisions for the Utility Sector

The SBA increased the size standards in three industry sectors of the Utility sector where standards for determining small business status are revenue-based. New standards provide for an increase in the amount of revenue that may be generated by businesses. Revenue amounts increased significantly in two of the three industry sectors. Standards for the Water Supply and Irrigation Systems sector were increased more than 36 fold from $7.0 million to $25.5 million. Standards for the Sewage Treatment Facilities sector were increased more than 27 fold from $7.0 million to $19.0 million. Standards for the Steam and Air-Condition Supply sector were increased by more than 11% from $12.5 million to $14.0 million.

For ten industry sectors, namely the electric power generation, transmission and distribution industries, the SBA changed the basis for which they determine the size of a small business. In these industry sectors, small business status will be based upon the number of employees rather than the number of megawatt hours.

Businesses in five of the ten industry sectors will be considered small businesses if they employ less than 250 persons. These industry sectors include the following:

- Solar Electric Power Generation

- Wind Electric Power Generation

- Geothermal Electric Power Generation

- Biomass Electric Power Generation

- Other Electric Power Generation Businesses

In two industry sectors, small business status will be determined based upon a 500-employee limitation. These industry sectors include the following:

- Hydroelectric Power Generation

- Electric Bulk Power Transmission and Control

The status in two industry sectors will be determined based upon a 750-employee limitation. These industry sectors include the following:

- Fossil Fuel Electric Power Generation

- Nuclear Electric Power Generation

Only one industry sector, Electric Power Distribution, will be judged based upon a 1,000-employee limitation.

Foonote1 of the SBA Table of Size Standards, which applies to the size of businesses in the Utility sector engaged in the generation, transmission, and/or distribution of electric energy for sale and its total electric output for the preceding fiscal year, was removed. It is anticipated that more than 400 additional businesses in the Utility sector will meet the requirements established under the new standards.

Revisions for the Construction Sector

Under the new standards, the SBA increased revenue-based size standards in two industry sectors of the Construction sector. Size standards for other industry sectors in the Construction sector remain as previously established. Size standards for businesses in the Land Subdivision industry increased more than 36 fold from $7.0 million to $25.0 million. Standards for businesses in the Dredging and Surface Cleanup Activities sector increased 28% from $20 million to $25.5 million. It should be noted that the Dredging and Surface Cleanup Activities sector is an “exception” to the Other Heavy and Civil Engineering Construction sector. Standards for the Other Heavy and Civil Engineering Construction sector remain unchanged. It is anticipated that about 500 additional businesses in the Construction sector will meet the requirements established under the new standards.