We are getting calls from many active clients who are upset about the SBAs proposed new rules radically changing the size standards for small businesses across the board however the IT firms feel most threatened.
In case you are unaware the SBA is looking to change the size standards for small businesses. This is not being done in a small way, and although this is occurring in all industries I am focusing on IT today. So, prepare to have your mind blown. To see the change please look at the following 5 IT NAICS Codes.
| NAICS | IT Industry | Current size standard | Proposed standard | Increase |
| 541511 | Custom Computer Programming | $34M | $531M | 15.6× |
| 541512 | Computer Systems Design | $34M | $531M | 15.6× |
| 541513 | Computer Facilities Management | $37M | $531M | 14.4× |
| 541519 | Other Computer Related Services | $34M | $531M | 15.6× |
| 518210 | Computing Infrastructure / Data Processing / Hosting | $40M* | $402M | ~10× |
15.6x Increase!
Yes you read that correctly, 15.6x increase in the size of the firms that will now be potentially competing for small businesses for contracts. The SBAs point is that these firms in the past were sitting in no-man’s land. Not big enough to compete with giant federal contractors and too large to get the advantages of being a small contractor.
Here is what the current IT landscape looks like currently:
| IT Contractor Group | Firms | Share of firms | Est. FY2025 Federal IT Sales | Avg. sales / firm |
| Certified Small Businesses 8(a), SDVOSB, WOSB, HUBZone | ~15,700 | 18.6% | ~$17B | ~$1.08M |
| Non-Certified Small Businesses | ~68,300 | 81.0% | ~$15B | ~$220K |
Now let’s look at the firms that would become Small Business Contractors:
| IT Contractor Group | Firms | Share of firms | Est. FY2025 Federal IT Sales | Avg. sales / firm |
| Newly-Small Formerly Large if Rule Change Goes into Effect | ~3,500 | ~$14B | ~$4.00M |
The small businesses with certifications are safe because of the following protections placed on certifications.
8a – owners’ total personal assets less than 6.5 million. (other net worth and net income restrictions apply)
HUBZone – generally not practical for larger firms to be in a HUBZone.
WOSB – women must own 51% of the firm, some of these firms could convert over but most of these firms likely have more complex ownerships structures.
EDWOSB – owners’ total personal assets less than 6.5 million. (other net worth and net income restrictions apply)
SDVOSB – 51% ownership by a service-disabled veteran will limit the number of larger firms meeting this requirement.
What is likely fair game is the small business contracts where those firms do not have certifications. This limits the dollars that these larger firms can poach to about $15B. Realistically most of these small businesses are likely to perform lower-level services that these larger firms cannot compete with on price or flexibility.
However, if this change goes into effect, having an SBA Certification will give you the ability to protect and grow your market share.
If you would like to find out if your firm currently qualifies for any of the SBA Certifications please feel free to give us a call as we can do this in about a 10-minute phone call.
