SBA’s Proposed Size Standards Overhaul: What 995→338 NAICS Groupings Means for You

The SBA has proposed the biggest rewrite of small business size standards in decades — and if it goes through as written, an estimated 114,541 additional firms would qualify as “small,” including 37,002 companies that already hold federal contracts. If you’ve built your business around a specific NAICS code and a specific receipts threshold, this proposal changes the math. Here’s what’s actually in it, who it affects, and what to do before the comment period closes.

What the SBA Is Proposing

The proposed rule consolidates 995 existing size standards down to 338 by grouping industries at the four-digit NAICS level instead of the current six-digit level — meaning far fewer, broader size categories instead of a size standard tailored to each narrow industry code. It also shifts the default measurement basis from annual receipts to employee counts for most industries, replacing the current seven-factor methodology with a simpler formula based on national industry size, geographic market concentration, and import adjustments.

Why the Change

SBA’s stated rationale is that consolidation reduces classification disputes — fewer, broader categories mean fewer arguments over which of two adjacent codes actually applies — and that employee counts are a more stable measure than receipts, which can swing year to year based on a single large contract award or a bad year. Whether that reasoning holds up is exactly what the comment period is for.

How Big the Threshold Jumps Actually Are

Some of the proposed increases are dramatic. Computer programming services, for example, would see its receipts-based threshold jump from the current $34–37 million range to $531 million under the new methodology — more than a tenfold increase. That’s not a rounding adjustment; it’s a fundamental redefinition of what counts as “small” in that industry.

Who Gains Small Business Status

SBA estimates 114,541 additional firms would newly qualify as small under the proposed standards, including 37,002 firms that are already active federal contractors — companies currently holding more than 105,000 contracts worth a combined $71 billion in FY2025. If you compete in a set-aside pool today, a meaningful number of new, often more experienced and better-resourced competitors could become eligible for that same pool.

Who Loses Small Business Status

The proposal isn’t one-directional. SBA estimates roughly 172 firms would lose small business status under the new standards, concentrated primarily in the telecommunications and waste collection sectors. If your firm sits in one of those industries near the current threshold, it’s worth checking your specific NAICS code against the proposed grouping now rather than after the rule is final.

What This Means If You’re Currently Small

Expect more competition inside set-aside pools you’ve relied on, particularly from newly small-designated firms that bring more contract history and deeper capacity than the incumbent small business population in that space. It may also mean fewer subcontracting opportunities flow down from primes, since some of those primes may themselves shift status and change how they structure their own small business subcontracting plans. This is a good moment to revisit our rule of two guide to understand how set-aside determinations actually get made, since a shift in the eligible pool changes how contracting officers apply that test.

What This Means If You’ve Been Avoiding Growth

Firms that have deliberately capped growth to stay under a receipts threshold suddenly have real headroom — in some industries, a lot of it. If revenue growth has been artificially constrained by a size standard you’re about to outgrow anyway under the new rules, this is worth factoring into near-term growth and hiring decisions rather than continuing to manage around a threshold that may not apply much longer.

How This Interacts With the Broader FAR Overhaul

This proposal isn’t happening in isolation — it follows the ongoing rewrite of FAR Part 19, which already restructured how small business set-asides get applied at the contract level. A size standards change on top of a set-aside structure change means the eligibility math for any given opportunity could look meaningfully different by the time both rules are final. Track both together rather than assuming one settles before the other moves.

What to Do Before the Comment Period Closes

Comments on both the proposed rule and SBA’s accompanying methodology white paper are due September 21, 2026. Current size standards remain in effect until a final rule publishes, so nothing changes yet — but the window to influence the outcome is open now. Concrete steps worth taking before then:

• Map your current NAICS code(s) to the proposed four-digit groupings to see which broader category you’d fall into.
• Reassess your size status under both the new employee-count default and the old receipts-based standard, since the gap between them varies significantly by industry.
• Evaluate whether existing teaming or mentor-protégé arrangements still make sense under the new competitive landscape.
• Model how the change affects your specific contract portfolio — which set-asides you’d still qualify for, and which pools get more crowded.
• Submit a focused comment addressing your industry’s specific threshold change if it materially affects your business, rather than a generic objection.

This Rule Is Still Just a Proposal

Nothing here is final. SBA can and does revise proposed rules based on comment volume and content, and a change this large is likely to draw substantial pushback from both directions — firms who’d lose competitive position in crowded pools, and firms in shrinking industries who’d lose status entirely. Don’t restructure your business around the proposed thresholds yet; do start tracking the rule’s progress toward a final version.

Where to Get Help Assessing Your Exposure

If you’re not sure how a shift from receipts to employee-count measurement would actually change your size status — or what it would mean for a specific set-aside pool you compete in — that’s exactly the kind of scoping question worth a real conversation rather than a guess. VFS’s GovCon consulting team can walk through your specific NAICS exposure and what, if anything, to do about it before the rule finalizes.

Key Takeaways

• SBA’s proposal collapses 995 size standards into 338 broader groupings and shifts most industries to an employee-count default instead of receipts.
• Some thresholds increase dramatically — computer programming services jumps from roughly $34–37 million to $531 million.
• An estimated 114,541 firms would newly qualify as small, including 37,002 existing federal contractors; roughly 172 firms (mostly telecom and waste collection) would lose status.
• Comments on the proposed rule and methodology white paper are due September 21, 2026 — current standards remain in effect until then.
• Map your NAICS code to the proposed grouping now so you’re not caught off guard when a final rule publishes.

FAQ

Does this change my size status right now?
No. Current size standards remain in effect until SBA publishes a final rule. This is still a proposed rule with an open comment period.

How do I find out if my industry’s threshold is changing?
Check your six-digit NAICS code against SBA’s proposed four-digit groupings and the accompanying methodology white paper, both part of the September 2026 rulemaking docket. If you’re unsure how to read the mapping, a GovCon-focused advisor can walk through it with your specific codes.

Should I submit a comment even if I’m not a policy expert?
Yes — SBA weighs public comments as part of the rulemaking process, and a specific, well-documented comment about how the change affects your business carries more weight than silence. You don’t need to be a regulatory expert to describe a concrete impact on your company.