Recent developments in government contracting include proposed changes that could significantly expand the pool of companies qualifying as small businesses, a new Department of War initiative intended to increase contractor access to classified work, and a directive that could restrict Canadian-origin products from the General Services Administration’s Multiple Award Schedules.
SBA Proposes Significant Changes to Small Business Size Standards
The Small Business Administration recently issued a proposed rule revising the size standards used to determine whether companies qualify as small businesses for government contracting and other SBA program purposes.
SBA size standards currently vary by industry, and the proposed rule and accompanying revised methodology would substantially simplify the existing framework. Among other changes, SBA proposes moving from six-digit North American Industry Classification System (NAICS) codes to a combination of four- and five-digit codes for purposes of differentiating industry groups, reducing the number of individual size standards from almost 1,000 to 338.
As one example, motor vehicle parts manufacturing is currently divided among at least seven six-digit NAICS codes with different size standards. Under the proposed framework, it would be divided between two four-digit codes and two corresponding standards.
The proposal would also move from the current combination of receipts-based and employee-based measurements to employment-based measurement as the default method for determining business size. SBA intends for the change to provide greater certainty for companies whose annual receipts fluctuate.
SBA estimates that the proposed revisions would result in more than 100,000 additional companies qualifying as small businesses. Certain industries would also see significant increases in their applicable thresholds. Semiconductor manufacturing, for example, would increase from 1,250 employees to 2,800 employees, while shipbuilding and oil drilling would also see substantial increases.
Companies should review the proposed standards and methodology to determine how their status could change. Businesses that remain above the applicable thresholds should also assess the competitive implications of a potentially larger pool of small businesses, including the possibility of increased use of small business set-asides. Comments on the proposed rule are due by September 21.
DoW Initiative Could Expand Contractor Access to Classified Work
The Department of War recently announced a Secure Space Network initiative intended to expand contractor access to classified work by deploying mobile Sensitive Compartmented Information Facilities (SCIFs) across the United States.
Many government contractors currently maintain facility security clearances that allow them to sponsor personnel security clearances for employees but lack facilities capable of safeguarding classified information. Consequently, those contractors may be unable to compete for contracts requiring possessing capability and can be limited to performing classified work at government facilities.
The new initiative is intended to reduce that barrier by deploying SCIFs at fixed locations for contractor use.
The Secure Space Network remains in its early stages, but contractors that currently lack possessing capability should monitor its development. Access to these facilities could potentially allow a broader group of companies to compete for classified contracting opportunities without making the substantial investment traditionally associated with developing their own secure facilities.
Directive Targets Canadian-Origin Products on GSA Schedules
The president recently directed the US Trade Representative to work with the General Services Administration to take steps to remove Canadian-origin products from GSA Multiple Award Schedules as part of the ongoing trade dispute between the United States and Canada.
According to a White House fact sheet, GSA schedules account for more than $50 billion in federal procurement activity, making the directive potentially significant for contractors offering Canadian-origin products through those vehicles.
The details of implementation remain to be seen. Contractors selling through GSA schedules should monitor forthcoming actions from GSA and other federal agencies and assess whether affected offerings rely on Canadian manufacturing or sourcing.
More broadly, the directive underscores the potential for trade policy developments to translate directly into federal procurement requirements. Contractors with international supply chains should continue monitoring country-of-origin rules and related sourcing restrictions as agencies implement the directive.
Looking Ahead
These latest developments could alter both access to federal contracting opportunities and the competitive environment in which contractors operate. SBA’s proposal could substantially expand the universe of companies eligible for small business opportunities, while DoW’s Secure Space Network may reduce a longstanding barrier to classified work.
At the same time, potential restrictions on Canadian-origin products demonstrate how changing trade policies can introduce new sourcing considerations for contractors. Companies should assess how these developments may affect their eligibility, competitive positioning, and supply chains as the relevant rules and programs take shape.