Government Contracts Monitor

Short Take: SBA Confirms Last Year’s Monetary-Based Size Standards Inflation Increases

January 25, 2016

The Small Business Administration (SBA) has published a Final Rule, effective January 25, 2016, adopting, as issued, SBA’s 2014 Interim Final Rule, previously discussed here, increasing SBA’s monetary-based size standards to account for inflation since 2008. These adjustments, which resulted in size standard increases of approximately 8.73% (rounded to the nearest $500,000), were made pursuant to 13 C.F.R. § 121.102(c), which requires SBA to examine the impact of inflation on monetary-based size standards at least once every five years, and were in addition to earlier implemented increases to SBA’s monetary-based size standards as part of SBA’s comprehensive size standards review pursuant to Section 1344 of the Small Business Jobs Act of 2010 (Pub. L. 111-240).

In responding to comments, SBA reiterates that the 8.73% increase was calculated based on changes in the Gross Domestic Product (GDP) price index since the previous inflation adjustment published in July 2008. One commentator suggested SBA should instead use the Consumer Price Index (CPI). SBA responded that the commentator did not provide a convincing justification, but SBA would consider such option in making future inflation adjustments. SBA also rejected a suggestion that SBA use a smaller $100,000 rounding increment, stating that such would overcomplicate SBA’s size standards with too many different size standards. However, SBA stated that it will consider applying an alternative rounding amount in future adjustments. SBA also stated that it considered whether inflation over the 19 months since the Interim Rule was published on June 12, 2014, warranted a further increase, but concluded that the intervening inflation “is not sufficient to warrant an additional increase at this time.”

The Final Rule also confirms SBA’s application of the 8.73% inflation adjustment to (1) the Tangible Net Worth and Net Income based alternative size standards for the Small Business Investment Company (SBIC) Program (13 C.F.R. § 121.301(c)); (2) Sales or Leases of Government Property Other than Manufacturing (13 C.F.R. § 121.502); and (3) Stockpile Purchases (13 C.F.R. § 121.512), as well as SBA’s prior determination to not increase the tangible net worth and net income based alternative size standards for SBA’s 504 and 7(a) Loan Programs (13 C.F.R. § 121.301(b)).

This Final Rule removes uncertainty and makes permanent the increased monetary-based size standards that have been in place since July 14, 2014. The currently applicable size standards may be found at 13 C.F.R. § 121.201.